The business cycle and drug use in Australia: evidence from repeated cross-sections of individual level data.

BACKGROUND

This paper examined the implications of the business cycle for cannabis and alcohol use. What little we know about cannabis use suggests that young Americans (teenagers and adults in their early 20s) seem more inclined to use illicit drugs and to use them more frequently with rises in the unemployment rate. In contrast, a more fulsome alcohol literature suggests that participation in drinking is unaffected by the business cycle. Heavy drinkers drink less during economic downturns and their reduced use counteracts the fact that light drinkers might drink a little more.

METHOD

Using individual level data from repeated cross-sections of Australia's National Drug Strategy Household Survey (NDSHS), spanning 1991-2007, this study examined the relationship between cannabis and alcohol use of Australians aged 14-49 years and the unemployment rate and real income per capita, two indicators of the business cycle.

RESULTS

Australians in their late 20s, 30s and 40s drink less frequently during economic downturns. If unemployment rate rises are accompanied by falls in income per capita, younger Australians will also drink less frequently. Recent participation in cannabis use (within the last year) increases with falls in income per capita regardless of age, although the increase is less marked for young people (14-24 years). Whereas the participation rate of people aged 25-49 years also falls with rising unemployment rates, the participation of younger people increases. Cannabis users younger than 35 will use more frequently as the unemployment rate rises. In contrast, older Australians will use less frequently.

CONCLUSION

Australia's recent economic slowdown has been characterised by rising unemployment rates without accompanying falls in income per capita. Based on our findings this slowdown should have encouraged young Australians aged 14-24 years to both drink and use cannabis more frequently. The slowdown would have had little impact on the frequency of drinking of older Australians. However it should have discouraged older Australians from using cannabis, and encouraged people in their late 30s and 40s to use less frequently, whilst encouraging those aged 25-34 years to use more frequently.