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Drug Trafficking Under Partial Prohibition: Evidence from Recreational Marijuana

47 Pages Posted: 6 Sep 2017  

Benjamin Hansen

University of Oregon - Department of Economics; NBER; IZA

Keaton S Miller

University of Oregon

Caroline Weber

University of Oregon - Department of Economics

Date Written: August 2017

Abstract

The use of marijuana is banned federally yet the substance will soon be available to 21% of the United States population under state laws. This regime of partial prohibition creates the potential for externalities created by states with legal markets. Indeed, a chief concern among local and national policy makers is the trafficking of marijuana produced legally in one state to other states. We measure, for the first time, this extent of this trafficking. We use a natural experiment: Oregon began allowing recreational marijuana sales on October 1, 2015, after Washington, its neighbor, began allowing sales on July 8, 2014. Using comprehensive administrative data on the universe of Washington sales, we find that Washington retailers along the Oregon border experienced a 41% decline in sales immediately following Oregon's market opening. Retailers along Washington's borders with Idaho and Canada experienced no such decline. The decline occurred equally across weekdays and weekends, and was largest among the largest transaction sizes, suggesting that drug trafficking, not drug tourism, was to blame. Our estimates suggest that 11.9% of the marijuana sold in Washington was trafficked out of the state before Oregon legalized and 7.5% remains trafficked today.

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Suggested Citation

Hansen, Benjamin and Miller, Keaton S and Weber, Caroline, Drug Trafficking Under Partial Prohibition: Evidence from Recreational Marijuana (August 2017). NBER Working Paper No. w23762. Available at SSRN: https://ssrn.com/abstract=3031733

Benjamin Hansen (Contact Author)

University of Oregon - Department of Economics ( email )

1285 University of ORegon
Eugene, OR 97403
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Keaton Miller

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Caroline Weber

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

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