Date of Original Version

2006

Type

Working Paper

Abstract or Description

The Australian heroin “drought” was a singular event deserving of the considerable scholarly attention it has engendered. The best way to understand market disruption is to examine both supply and demand side indicators, yet data on the former have been relatively neglected. Here we explore a rich data set on heroin and methamphetamine purity from 1998-2002 in Victoria that support monthly and even fortnightly time series. These series show that the drought was characterized by abrupt and substantial declines in heroin purity (from ~40% to as low as 10-15%), but those steep declines followed an extended period of substantial erosion in purity (from 70-75% in early 1999 to ~40% by the end of 2000). Purity rebounded from its post-drought lows but far from completely, stabilizing at ~20% for 2002. The heroin purity declines do not appear to stem from “cutting” at lower market levels. The declines did increase the purity variability per pure unit of heroin. There was no comparable evidence of contemporaneous effects in the methamphetamine purity series.

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