The Grass is Greener on the Other Side: How extensive is the Interstate Trafficking of Recreational Marijuana? Benjamin Hansen, Keaton Miller, Caroline Weber University of Oregon, University of Washington AEA/ASSA, 2019

Federalism, Partial Prohibition, and Cross Border Sales: Evidence from Recreational Marijuana Benjamin Hansen, Keaton Miller, Caroline Weber University of Oregon, University of Washington AEA/ASSA, 2019

Public opinion has reached a tipping point…

Next AEA/ASSA in Atlanta?

…which has led to policy changes in some places…

…and significant discussion in others Context: 650k MJ arrests in 2016 More than all violent crime Racial disparities: blacks ~4x as likely as whites to be arrested for possession Surveys indicate usage rates are identical

We don’t know what to expect from (quasi) legal markets What are the consequences of partial prohibition? How should we tax and regulate marijuana? What are the public health consequences of legalization? (prices, stigma, dosage, etc) How do police shift enforcement priorities? Unique Case of Federalism

Significant conflict between governments US Supreme Court struck down 90s California law in 6-3 decision However, Murphy v. NCAA implies that partial prohibition regimes will continue under the Roberts Court Attorneys General from both political parties concerned about unilateral legalization Nebraska and Oklahoma sued Colorado claiming law enforcement spillovers

We’ll start by focusing in What are the consequences of partial prohibition? How extensive is cross border shopping? How should we tax and regulate marijuana? What are the public health consequences of legalization? (prices, stigma, dosage, etc) How do police shift enforcement priorities?

We take advantage of a unique opportunity in the Pacific Northwest

Background

“Federal resources in your States [will not be focused] on individuals whose actions are in clear and unambiguous compliance with state laws.”

We focus on Oregon’s market opening on October 1, 2015 Date Event 11/1998 Medical marijuana allowed in WA and OR 11/2012 WA recreational marijuana ballot measure passes 7/2014 First licensed dispensaries open in WA 11/2014 OR recreational marijuana ballot measure passes 10/2015 “Emergency” bill allows Oregon medical retailers to sell recreational marijuana

Data

Our data come from Washington’s traceability system Washington requires firms to report information to a “seed-to-sale” tracking system Firms report all movements of cannabis plants and MJ products throughout supply chain Retailers must record price and weight sold We obtain this data for all WA retailers from 2014-2017

Is There Excess Demand on the Border?

Oregon’s Legalization

  Key assumption: No other changes in demand coincident with Oregon’s market opening Also: Use different techniques to choose bandwidth

WA Marijuana sales

Oregon border sales

Differences-in-discontinuities

Robustness Robust to polynomial order Bandwidth Measures of marijuana (sales/weight) Definition of border

So What??

Policy Implications Gained an extra $64-$100 Million in Revenue from Cross Border Sales Increased Effective Legalization Per Capita Marijuana in OR, by 5-10 Percent Increased Effective Legalization in Idaho by 30-50 Percent With Taxes and Federalism We Usually Worry About a Race to the Bottom Here We Have a Race to Legalization!

Partial prohibition is likely to continue  

This question is important for MJ policy research generally Many studies use diff-in-diff to estimate effects of legalization on health outcomes Aydelotte et al (2017, AJPH) on traffic accidents Cerdá et al (2017, JAMA Ped.) on adolescent use However, diff-in-diff requires control groups, often taken to be neighboring areas If spillovers are present, estimates will be biased towards zero