Marijuana on Main Street? Estimating Demand in Markets with Limited Access
American Economic Review
vol. 106,
no. 8, August 2016
(pp. 2009-45)
(Complimentary)
Abstract
Marijuana is the most common illicit drug with vocal advocates for legalization. Among other things, legalization would increase access and remove the stigma of illegality. Our model disentangles the role of access from preferences and shows that selection into access is not random. We find that traditional demand estimates are biased resulting in incorrect policy conclusions. If marijuana were legalized, those under 30 would see modest increases in use of 28 percent, while on average use would increase by 48 percent (to 19.4 percent). Tax policies are effective at curbing use, where Australia could raise AU$1 billion (and the United States US$12 billion).Citation
Jacobi, Liana, and Michelle Sovinsky. 2016. "Marijuana on Main Street? Estimating Demand in Markets with Limited Access." American Economic Review, 106 (8): 2009-45. DOI: 10.1257/aer.20131032Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- K14 Criminal Law
- K42 Illegal Behavior and the Enforcement of Law