Business cycle impacts on substance use of adolescents: A multi-country analysis

Populations respond to changes in the economic climate in a variety of ways. The recent 'Great Recession' has brought attention to the vulnerability of many economies around the world to changes in non-domestic macroeconomic fluctuations. However, empirical evidence on the responses of adolescents' substance consumption behaviour when the economy deteriorates is very scarce. Thus, the focus of this paper is to analyse the substance consumption patterns displayed by adolescents in response to changes in macroeconomic conditions in a large number of countries. Our results show that beer and wine consumption vary counter-cyclically (a 1pp increase in the unemployment rate increases the probability of drinking beer (wine) by 3% (5.5%)) while adolescent smoking prevalence varies pro-cyclically (a 1pp increase in the unemployment rate decreases the probability of being a current smoker by 3.8%). More importantly, we find that the probability of ever being drunk increases by 1.3% for a 1pp increase in the unemployment rate. Further to this, substantial heterogeneous effects from the aggregate-level results were found when analysing a variety of demographic and geographic dimensions. In light of the existing empirical evidence which outlines that early substance initiators demonstrate worse neurological deficits and suffer stronger labour market penalties (compared to later initiators or abstainers) these findings can aid policy makers in reducing these lasting adverse outcomes.