Federalism, partial prohibition, and cross-border sales: Evidence from recreational marijuana

Benjamin Hansen, Keaton Miller and Caroline Weber ()

Journal of Public Economics, 2020, vol. 187, issue C

Abstract: Marijuana is partially prohibited: though banned federally, it is available to 1 in 4 U.S. adults under state statutes. We measure the size of the interstate trade generated by state-level differences in legal status with a natural experiment: Oregon allowed stores to sell marijuana for recreational use on October 1, 2015, next to Washington where stores had been selling recreational marijuana since July 2014. Using administrative data covering the universe of Washington's sales and a differences-in-discontinuities approach, we find retailers along the Oregon border experienced a 36% decline in sales immediately after Oregon's market opened. We investigate the home location of recent online reviewers of marijuana retailers and find similar cross-border patterns. By the end of Washington's 2018 fiscal year, our results imply that Washington had earned between $44 million and $75 million in tax revenue from cross-border shoppers. These cross-border incentives may create a “race to legalize.”

Keywords: Federalism; Cross-border sales; Spillover; Diversion; Prohibition; Marijuana; Natural experiment; Regression discontinuity; Illegal drugs (search for similar items in EconPapers)
JEL-codes: H73 H77 I12 I18 K42 P48 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Working Paper: Federalism, Partial Prohibition, and Cross-Border Sales: Evidence from Recreational Marijuana (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:187:y:2020:i:c:s0047272720300232

DOI: 10.1016/j.jpubeco.2020.104159

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