Externalities of Marijuana Legalization: Marijuana Use in Non-Legalizing States

Abstract

We study the impact of distant connections on marijuana use. Leveraging the Facebook Social Connectedness Index, which measures the strength of connectedness between geographic areas based on Facebook friendship ties, we explore the impact of connections to states where recreational marijuana use is legalized on marijuana use and workplace drug testing positivity rates in areas where marijuana remains illegal. The findings reveal that areas which are more connected to legalized states exhibit higher rates of marijuana use and workplace drug testing positivity even after controlling for geographic proximity to the legalized states. The results suggest that even connections beyond closed proximity can play a significant role in shaping individuals’ behaviors. Our findings of the externality of legalization in one state to other more connected out-of-state areas imply that studies that estimate the impact of legalization using a standard difference-in-differences approach without taking into account the network underestimate the direct effect on the state that legalizes.

Keywords: marijuana, externalities, Facebook

JEL Classification: I12, I18