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The Effect Of Legalizing Retail Marijuana On Housing Values: Evidence From Colorado

Author

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  • Cheng Cheng
  • Walter J. Mayer
  • Yanling Mayer

Abstract

Does legalizing retail marijuana generate more benefits than costs? This paper provides a first step toward addressing that question by measuring the benefits and costs that are capitalized into housing values. We exploit the time‐series and cross‐sectional variations in the adoption of Colorado's municipality retail marijuana laws (RMLs) and examine the effect on housing values with a difference‐in‐differences strategy. Our estimates show that the legalization leads to an average 6% increase in housing values, indicating that the capitalized benefits outweigh the costs. In addition, we find suggestive evidence that this relatively large housing value appreciation is likely due to RMLs inducing strong housing demand while having no discernible effect on housing supply. Finally, we show that the effect of RMLs is heterogeneous across locations and property types. (JEL K20, R28)

Suggested Citation

  • Cheng Cheng & Walter J. Mayer & Yanling Mayer, 2018. "The Effect Of Legalizing Retail Marijuana On Housing Values: Evidence From Colorado," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1585-1601, July.
  • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:3:p:1585-1601
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    File URL: https://doi.org/10.1111/ecin.12556
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:eecrev:v:113:y:2019:i:c:p:63-76 is not listed on IDEAS
    2. Carrieri, Vincenzo & Madio, Leonardo & Principe, Francesco, 2019. "Light cannabis and organized crime: Evidence from (unintended) liberalization in Italy," European Economic Review, Elsevier, vol. 113(C), pages 63-76.

    More about this item

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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