46 Pages Posted: 6 Sep 2017
Date Written: August 2017
Despite federal prohibition, recreational marijuana is available to 21% of the United States population. A chief concern among policy makers across multiple levels of government and political parties is inter-state diversion of marijuana from states with legal markets to others. We measure this diversion with a natural experiment. Oregon opened a recreational market on October 1, 2015 next to an existing market in Washington, which opened on July 8, 2014. Using comprehensive administrative data on the universe of Washington sales, we find 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 diversion, not drug tourism, was to blame. Our estimates suggest that 11.9% of the marijuana sold in Washington was diverted out of the state before Oregon legalized and 7.5% remains diverted today.
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Suggested Citation: Suggested Citation
Hansen, Benjamin and Miller, Keaton S and Weber, Caroline, How Extensive is Inter-State Diversion of Recreational Marijuana? (August 2017). NBER Working Paper No. w23762. Available at SSRN: https://ssrn.com/abstract=3031733
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