Federalism, Partial Prohibition, and Cross-Border Sales: Evidence from Recreational Marijuana

65 Pages Posted: 6 Sep 2017 Last revised: 5 Jun 2023

See all articles by Benjamin Hansen

Benjamin Hansen

University of Oregon - Department of Economics; NBER; IZA

Keaton Miller

University of Oregon

Caroline Weber

University of Kentucky

Date Written: August 2017

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 percent 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.”

Suggested Citation

Hansen, Benjamin and Miller, Keaton and Weber, Caroline, Federalism, Partial Prohibition, and Cross-Border Sales: Evidence from Recreational Marijuana (August 2017). NBER Working Paper No. w23762, Available at SSRN: https://ssrn.com/abstract=3031733

Benjamin Hansen (Contact Author)

University of Oregon - Department of Economics ( email )

1285 University of ORegon
Eugene, OR 97403
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Keaton Miller

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Caroline Weber

University of Kentucky ( email )

Martin School of Public Policy
431 Patterson Office Tower
Lexington, KY Kentucky 40506
United States

HOME PAGE: http://www.uky.edu/~cwki230/

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