Is Grass Greener in the Gray Zone? Legalization and Innovation in the Cannabis Market
49 Pages Posted: 6 Mar 2023 Last revised: 15 Mar 2023
Date Written: February 28, 2023
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: Suggested Citation