Is Grass Greener in the Gray Zone? Legalization and Innovation in the Cannabis Market

49 Pages Posted: 6 Mar 2023 Last revised: 11 Apr 2023

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

Nathan Chan

University of Massachusetts Amherst

Date Written: February 28, 2023

Abstract

This paper studies the impact of legalization on the rate and direction of innovation in the cannabis market. We construct novel data on cannabis-related innovation in clinical trials and patent applications. Using staggered difference-in-differences models utilizing the variation in state legalization of medical and adult-use cannabis, we find no evidence that medical cannabis laws affect innovation. Adult-use cannabis laws increase trials and patenting, especially patenting in downstream products and methods rather than upstream chemical or treatment innovation. These results suggest that legalization increases innovation in the cannabis market, but not naturally and not enough for where innovation matters the most.

Keywords: cannabis legalization, innovation, clinical trials, patent applications

JEL Classification: I11, O30, K20

Suggested Citation

Wang, Lucy Xiaolu and Chan, Nathan, Is Grass Greener in the Gray Zone? Legalization and Innovation in the Cannabis Market (February 28, 2023). Available at SSRN: https://ssrn.com/abstract=4373615 or http://dx.doi.org/10.2139/ssrn.4373615

Lucy Xiaolu Wang (Contact Author)

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

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

Max Planck Institute for Innovation and Competition ( email )

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Munich, Bayern 80539
Germany

Nathan Chan

University of Massachusetts Amherst ( email )

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