The Grass is Greener on the Other Side: How Extensive is the Interstate Trafficking of Recreational Marijuana?
60 Pages Posted: 1 May 2018
Date Written: March 2018
Marijuana is partially prohibited: though banned federally, it will soon be available to almost 1 in 4 U.S. adults under state statutes. A chief concern among policy makers is marijuana trafficking from states with legal markets elsewhere. We measure trafficking with a natural experiment. Oregon opened recreationally licensed stores on October 1, 2015, next to Washington where stores had been legally selling recreational marijuana since July, 2014. Using administrative data covering the universe of recreational market sales, we find Washington retailers along the Oregon border experienced a 41% decline in sales immediately following Oregon's market opening. In counties that are the closest crossing point for the majority of the neighboring population, the estimated decrease grows to 58%, and is the largest for the biggest transactions. We also test if these inter-state spill-overs led to health externalities by studying traffic accidents in Oregon from 2011-2015.
Keywords: Externality, Spillover, Drug Trafficking, Diversion, Prohibition, Marijuana, Natural Experiment, Regression Discontinuity, Illegal Drugs
JEL Classification: I12, I18, K42, R41, P48
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