The Market for Cannabis Licensing

39 Pages Posted: 2 Nov 2021 Last revised: 5 Jan 2022

See all articles by Lucy Xiaolu Wang

Lucy Xiaolu Wang

University of Massachusetts Amherst - Department of Resource Economics; Max Planck Institute for Innovation and Competition

Nicholas Wilson

Ludwig Maximilian University of Munich, Faculty of Economics, Students

Date Written: October 30, 2021

Abstract

US states have taken varied approaches to licensing medical and adult-use cannabis businesses under federal prohibition, but up to now there is limited research on cross-state licensing approaches. This paper provides a systematic analysis of the current strategies taken by states that have legalized some form of cannabis. We construct comprehensive data on cannabis licenses offered in each state as well as metrics for license categories, license cost, and license issuance volume. We find that states that have legalized both medical and adult-use cannabis tend to license medical cannabis more strictly. States that legalized cannabis earlier offer licenses in more license categories, and of lower cost and greater issuance volume. In addition, states with more complexity in the structure of their offered licenses are those that tend to impose non-retail price cannabis taxes. Finally, we argue that licensing and taxation of cannabis by states is comparatively closer to alcohol (particularly distilled spirits) than tobacco.

Keywords: licensing, rationing, medical cannabis, adult-use cannabis, cannabis legalization

JEL Classification: I1, D45

Suggested Citation

Wang, Lucy Xiaolu and Wilson, Nicholas, The Market for Cannabis Licensing (October 30, 2021). Available at SSRN: https://ssrn.com/abstract=3953347 or http://dx.doi.org/10.2139/ssrn.3953347

Lucy Xiaolu Wang (Contact Author)

University of Massachusetts Amherst - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003
United States

HOME PAGE: http://www.lucyxiaoluwang.com/

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

Nicholas Wilson

Ludwig Maximilian University of Munich, Faculty of Economics, Students ( email )

Germany

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