Scientific report: Macro-economic analysis of heroin markets in the EU and the impact of substitution treatment

This is the final report of a study to develop a macro-economic model, simulating the career of potential heroin users and the accompanying demand for heroin. Additionally, the effects of different measures and changes in the settings of available substitution treatment were the subject of analysis. The secondary goal of the study was to identify the gaps in information, and consequently indicate the nature of data needed in future research. A model was developed to simulate the heroin career of a potential user through different ‘states’ (‘non- user’, ‘has tried’, ‘dependent treated’, etc.), based on the principle that individuals make transitions from one ‘state’ to another within six months and starts with a theoretical population of >12 year-olds (all non heroin users). After 10 years, a cross-sectional population could be obtained and broken down into different ‘states’. Individual’s choices within the heroin market and the quantity of heroin consumed depended on consumers budgetary constraints (income and heroin price) and the price of other drugs (substitutes and complements). The model was fed with estimated values on transition probabilities between different ‘states’ and economic factors (price and income elasticity).  After 10 years, the effect of changes in heroin price, income level, access to substitution treatment and incidence of persons experimenting with the drug was modelled and the impact on heroin demand over the next 10 years was assessed. By using a ‘bottom-up’ approach, the results at individual level could be aggregated to model the heroin demand at population level.