Federalism, Partial Prohibition, and Cross-Border Sales: Evidence from Recreational Marijuana
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.”
Previously circulated as “The Grass is Greener on the Other Side: How Extensive is the Interstate Trafficking of Recreational Marijuana?” We thank Kendall Houghton for exemplary research assistance. We appreciate helpful comments from Amanda Agan, Mark Anderson, Sandra Black, Gordon Dahl, Jennifer Doleac, Edward Rubin, Michael Kuhn, Lars Lefgren, Jason Lindo, Grant McDermott, Jonathan Meer, Matthew Notowidigdo, Kevin Schnepel, Jeremy West, several anonymous referees, and participants at the NBER SI, WEAI, ISSDP Annual Meetings and seminars at BYU, RAND, San Diego State University, UC Santa Cruz, the University of Essex, and the University of Southern Denmark. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Benjamin Hansen & Keaton Miller & Caroline Weber, 2020. "Federalism, partial prohibition, and cross-border sales: Evidence from recreational marijuana," Journal of Public Economics, vol 187. citation courtesy of