The Effect of Legalizing Retail Marijuana on Housing Values: Evidence from Colorado

17 Pages Posted: 5 Jun 2018

See all articles by Cheng Cheng

Cheng Cheng

University of Mississippi - Department of Economics

Walt Mayer

affiliation not provided to SSRN

Yanling Mayer

affiliation not provided to SSRN

Date Written: July 2018

Abstract

Does legalizing retail marijuana generate more benefits than costs? This paper provides a first step toward addressing that question by measuring the benefits and costs that are capitalized into housing values. We exploit the time‐series and cross‐sectional variations in the adoption of Colorado's municipality retail marijuana laws (RMLs) and examine the effect on housing values with a difference‐in‐differences strategy. Our estimates show that the legalization leads to an average 6% increase in housing values, indicating that the capitalized benefits outweigh the costs. In addition, we find suggestive evidence that this relatively large housing value appreciation is likely due to RMLs inducing strong housing demand while having no discernible effect on housing supply. Finally, we show that the effect of RMLs is heterogeneous across locations and property types.

JEL Classification: K20, R28

Suggested Citation

Cheng, Cheng and Mayer, Walt and Mayer, Yanling, The Effect of Legalizing Retail Marijuana on Housing Values: Evidence from Colorado (July 2018). Economic Inquiry, Vol. 56, Issue 3, pp. 1585-1601, 2018. Available at SSRN: https://ssrn.com/abstract=3188584 or http://dx.doi.org/10.1111/ecin.12556

Cheng Cheng (Contact Author)

University of Mississippi - Department of Economics ( email )

University, MS 38677
United States

HOME PAGE: http://https://sites.google.com/site/chengchenghome/

Walt Mayer

affiliation not provided to SSRN

Yanling Mayer

affiliation not provided to SSRN

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