Economic manifestations of opiate addiction: Evidence from historical data from colonial Indonesia

The aim of this paper is to demonstrate, using an example, the utility of historical data to illuminate important questions in the field of drug dependence research. The literature on the consumption of addictive substances often characterizes users as being one of two types: “addicts” and “casual users.” An econometric characterization of the responses of opium consumers in the late-colonial Netherlands Indies to changes in the price of opium and other important variables is provided, which explicitly acknowledges the existence of different types of opium smokers, as modeled in the underlying theory. The results reveal systematic differences between the behavior of groups of high-intensity consumers and groups of low-intensity consumers. While the findings show that both groups showed similar total price elasticities, the high-intensity consumers were affected predominantly via changes in the number of users rather than in per capita consumption. In the course of the analysis, various analytic methods that are new to the field of drug dependence research are introduced.