IDEAS home Printed from https://ideas.repec.org/a/spr/jopoec/v38y2025i2d10.1007_s00148-025-01100-8.html
   My bibliography  Save this article

The effects of recreational marijuana legalization on employment and earnings

Author

Listed:
  • Dhaval M. Dave

    (Bentley University, NBER & IZA)

  • Yang Liang

    (San Diego State University)

  • Caterina Muratori

    (San Diego State University)

  • Joseph J. Sabia

    (San Diego State University & IZA)

Abstract

Despite nearly 70 percent of the American public supporting legalization of recreational marijuana, opponents argue that increased marijuana use may diminish motivation, impede cognitive function, and harm health, each of which could adversely affect adults’ economic well-being. This study is the first to explore the impacts of recreational marijuana laws (RMLs) on employment and wages. Difference-in-differences estimates show little evidence that RMLs adversely affect labor market outcomes among most working-age individuals. Rather, our estimates show that RML adoption is associated with an increase in agricultural employment, consistent with the opening of a new licit market. A causal interpretation of our findings is supported by event-study analyses using dynamic difference-in-differences estimates designed to expunge bias due to heterogeneous and dynamic treatment effects, and alternative policy estimates generated using a synthetic control design.

Suggested Citation

  • Dhaval M. Dave & Yang Liang & Caterina Muratori & Joseph J. Sabia, 2025. "The effects of recreational marijuana legalization on employment and earnings," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(2), pages 1-41, June.
  • Handle: RePEc:spr:jopoec:v:38:y:2025:i:2:d:10.1007_s00148-025-01100-8
    DOI: 10.1007/s00148-025-01100-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00148-025-01100-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s00148-025-01100-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert Kaestner, 1994. "The Effect of Illicit Drug Use on the Labor Supply of Young Adults," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 126-155.
    2. D. Mark Anderson & Daniel I. Rees, 2014. "The Role of Dispensaries: The Devil is in the Details," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 33(1), pages 235-240, January.
    3. Wang, Xiaolu & Chen, Qihui & Zhao, Qiran & Zhu, Chen, 2022. "Alcohol consumption and income: Evidence from one-sample and two-sample Mendelian randomizations," Economics Letters, Elsevier, vol. 219(C).
    4. Chakraborty Avinandan & Doremus Jacqueline & Stith Sarah, 2021. "The effects of recreational cannabis access on labor markets: evidence from Colorado," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-86, January.
    5. repec:plo:pone00:0187795 is not listed on IDEAS
    6. van Ours, Jan C. & Williams, Jenny, 2012. "The effects of cannabis use on physical and mental health," Journal of Health Economics, Elsevier, vol. 31(4), pages 564-577.
    7. van Ours, Jan C. & Williams, Jenny, 2009. "Why parents worry: Initiation into cannabis use by youth and their educational attainment," Journal of Health Economics, Elsevier, vol. 28(1), pages 132-142, January.
    8. Michael T. French & M. Christopher Roebuck & Pierre Kébreau Alexandre, 2001. "Illicit Drug Use, Employment, and Labor Force Participation," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 349-368, October.
    9. Gregory Conyers & Ian Ayres, 2020. "A lottery test of the effect of dispensaries on emergency room visits in Arizona," Health Economics, John Wiley & Sons, Ltd., vol. 29(8), pages 854-864, August.
    10. Brandyn F. Churchill & Joseph J. Sabia, 2019. "The Effects of Minimum Wages on Low‐Skilled Immigrants’ Wages, Employment, and Poverty," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 58(2), pages 275-314, April.
    11. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    12. David Cho & Daniel I. García & Joshua Montes & Alison E. Weingarden, 2021. "Labor Market Effects of the Oxycodone-Heroin Epidemic," Finance and Economics Discussion Series 2021-025, Board of Governors of the Federal Reserve System (U.S.).
    13. Jenny Lye & Joe Hirschberg, 2010. "Alcohol Consumption And Human Capital: A Retrospective Study Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 24(2), pages 309-338, April.
    14. Chu, Yu-Wei Luke & Gershenson, Seth, 2018. "High times: The effect of medical marijuana laws on student time use," Economics of Education Review, Elsevier, vol. 66(C), pages 142-153.
    15. Anderson, D. Mark & Rees, Daniel I., 2021. "The Public Health Effects of Legalizing Marijuana," IZA Discussion Papers 14292, Institute of Labor Economics (IZA).
    16. Alex Hollingsworth & Coady Wing & Ashley C. Bradford, 2022. "Comparative Effects of Recreational and Medical Marijuana Laws on Drug Use among Adults and Adolescents," Journal of Law and Economics, University of Chicago Press, vol. 65(3), pages 515-554.
    17. Anna Choi & Dhaval Dave & Joseph J. Sabia, 2019. "Smoke Gets in Your Eyes: Medical Marijuana Laws and Tobacco Cigarette Use," American Journal of Health Economics, MIT Press, vol. 5(3), pages 303-333, Summer.
    18. Dhaval Dave & Monica Deza & Brady Horn, 2021. "Prescription drug monitoring programs, opioid abuse, and crime," Southern Economic Journal, John Wiley & Sons, vol. 87(3), pages 808-848, January.
    19. Johanna Catherine Maclean & Keshar M. Ghimire & Lauren Hersch Nicholas, 2021. "Marijuana legalization and disability claiming," Health Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 453-469, February.
    20. Dragone, Davide & Prarolo, Giovanni & Vanin, Paolo & Zanella, Giulio, 2019. "Crime and the legalization of recreational marijuana," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 488-501.
    21. Park, Sujeong & Powell, David, 2021. "Is the rise in illicit opioids affecting labor supply and disability claiming rates?," Journal of Health Economics, Elsevier, vol. 76(C).
    22. Anderson, D.M. & Rees, D.I. & Sabia, J.J., 2014. "Medical marijuana laws and suicides by gender and age," American Journal of Public Health, American Public Health Association, vol. 104(12), pages 2369-2376.
    23. David Neumark & Olena Nizalova, 2007. "Minimum Wage Effects in the Longer Run," Journal of Human Resources, University of Wisconsin Press, vol. 42(2).
    24. Yu-Wei Luke Chu, 2015. "Do Medical Marijuana Laws Increase Hard-Drug Use?," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 481-517.
    25. Powell, David & Pacula, Rosalie Liccardo & Jacobson, Mireille, 2018. "Do medical marijuana laws reduce addictions and deaths related to pain killers?," Journal of Health Economics, Elsevier, vol. 58(C), pages 29-42.
    26. Jan C. van Ours & Jenny Williams, 2011. "Cannabis use and mental health problems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(7), pages 1137-1156, November.
    27. Hunt, Priscillia E & Pacula, Rosalie Liccardo & Weinberger, Gabriel, 2018. "High on Crime? Exploring the Effects of Marijuana Dispensary Laws on Crime in California Counties," IZA Discussion Papers 11567, Institute of Labor Economics (IZA).
    28. McMichael, Benjamin J. & Van Horn, R. Lawrence & Viscusi, W. Kip, 2020. "The impact of cannabis access laws on opioid prescribing," Journal of Health Economics, Elsevier, vol. 69(C).
    29. Matthew C. Harris & Lawrence M. Kessler & Matthew N. Murray & Beth Glenn, 2020. "Prescription Opioids and Labor Market Pains: The Effect of Schedule II Opioids on Labor Force Participation and Unemployment," Journal of Human Resources, University of Wisconsin Press, vol. 55(4), pages 1319-1364.
    30. Jan C. Ours & Jenny Williams, 2015. "Cannabis Use And Its Effects On Health, Education And Labor Market Success," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 993-1010, December.
    31. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    32. Pinka Chatterji, 2006. "Illicit drug use and educational attainment," Health Economics, John Wiley & Sons, Ltd., vol. 15(5), pages 489-511, May.
    33. John A. List & Azeem M. Shaikh & Yang Xu, 2019. "Multiple hypothesis testing in experimental economics," Experimental Economics, Springer;Economic Science Association, vol. 22(4), pages 773-793, December.
    34. Michele Baggio & Alberto Chong & Sungoh Kwon, 2020. "Marijuana and alcohol: Evidence using border analysis and retail sales data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(2), pages 563-591, May.
    35. Jeffrey DeSimone, 1998. "Is Marijuana a Gateway Drug?," Eastern Economic Journal, Eastern Economic Association, vol. 24(2), pages 149-164, Spring.
    36. Amanda Agan & Sonja Starr, 2018. "Ban the Box, Criminal Records, and Racial Discrimination: A Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(1), pages 191-235.
    37. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    38. Wen, Hefei & Hockenberry, Jason M. & Cummings, Janet R., 2015. "The effect of medical marijuana laws on adolescent and adult use of marijuana, alcohol, and other substances," Journal of Health Economics, Elsevier, vol. 42(C), pages 64-80.
    39. Jeff DeSimone, 2002. "Illegal Drug Use and Employment," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 952-977, October.
    40. Michael T. French & M. Christopher Roebuck & Pierre Kébreau Alexandre, 2001. "Illicit Drug Use, Employment, and Labor Force Participation," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 349-368, October.
    41. Damon Jones & David Molitor & Julian Reif, 2019. "What do Workplace Wellness Programs do? Evidence from the Illinois Workplace Wellness Study," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 1747-1791.
    42. Michael T. French & M. Christopher Roebuck & Pierre Kébreau Alexandre, 2001. "Illicit Drug Use, Employment, and Labor Force Participation," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 349-368, October.
    43. Hansen, Benjamin & Miller, Keaton & Weber, Caroline, 2020. "Federalism, partial prohibition, and cross-border sales: Evidence from recreational marijuana," Journal of Public Economics, Elsevier, vol. 187(C).
    44. Joseph J. Sabia & Thanh Tam Nguyen, 2018. "The Effect of Medical Marijuana Laws on Labor Market Outcomes," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 361-396.
    45. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    46. D. Mark Anderson & Benjamin Hansen & Daniel I. Rees, 2013. "Medical Marijuana Laws, Traffic Fatalities, and Alcohol Consumption," Journal of Law and Economics, University of Chicago Press, vol. 56(2), pages 333-369.
    47. Jennifer L. Doleac & Benjamin Hansen, 2020. "The Unintended Consequences of “Ban the Box”: Statistical Discrimination and Employment Outcomes When Criminal Histories Are Hidden," Journal of Labor Economics, University of Chicago Press, vol. 38(2), pages 321-374.
    48. Joseph J. Sabia & Jeffrey Swigert & Timothy Young, 2017. "The Effect of Medical Marijuana Laws on Body Weight," Health Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 6-34, January.
    49. D. Mark Anderson & Daniel I. Rees, 2021. "The Public Health Effects of Legalizing Marijuana," NBER Working Papers 28647, National Bureau of Economic Research, Inc.
    50. Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, vol. 96(5), pages 1802-1820, December.
    51. Petri Böckerman & Ari Hyytinen & Terhi Maczulskij, 2017. "Alcohol Consumption and Long‐Term Labor Market Outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 275-291, March.
    52. Rahi Abouk & Keshar M. Ghimire & Johanna Catherine Maclean & David Powell, 2021. "Does Marijuana Legalization Affect Work Capacity? Evidence from Workers’ Compensation Benefits," NBER Working Papers 28471, National Bureau of Economic Research, Inc.
    53. Darin F. Ullman, 2017. "The Effect of Medical Marijuana on Sickness Absence," Health Economics, John Wiley & Sons, Ltd., vol. 26(10), pages 1322-1327, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sabia, Joseph J. & Dave, Dhaval & Alotaibi, Fawaz & Rees, Daniel I., 2024. "The effects of recreational marijuana laws on drug use and crime," Journal of Public Economics, Elsevier, vol. 234(C).
    2. Chakraborty Avinandan & Doremus Jacqueline & Stith Sarah, 2021. "The effects of recreational cannabis access on labor markets: evidence from Colorado," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-86, January.
    3. Mir M. Ali & Chandler McClellan & Ryan Mutter & Daniel I. Rees, 2023. "Recreational marijuana laws and the misuse of prescription opioids: Evidence from National Survey on Drug Use and Health microdata," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 277-301, February.
    4. Maorui Yang & Han Yu, 2024. "Long-Run Effects of Childhood Exposure to Medical Marijuana Laws on Education and Labor Market Outcomes," Journal of Labor Research, Springer, vol. 45(4), pages 565-597, December.
    5. Petrova, Olga & Gray, Natallia, 2021. "The effects of medical marijuana laws on birth outcomes: Evidence from early adopting U.S. states," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 68-82.
    6. Rahi Abouk & Keshar M. Ghimire & Johanna Catherine Maclean & David Powell, 2023. "Pain Management and Work Capacity: Evidence From Workers’ Compensation and Marijuana Legalization," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(3), pages 737-770, June.
    7. Dave, Dhaval & Liang, Yang & Pesko, Michael F. & Phillips, Serena & Sabia, Joseph J., 2023. "Have recreational marijuana laws undermined public health progress on adult tobacco use?," Journal of Health Economics, Elsevier, vol. 90(C).
    8. Sabia, Joseph J. & Nguyen, Thanh Tam, 2016. "The Effect of Medical Marijuana Laws on Labor Market Outcomes," IZA Discussion Papers 9831, Institute of Labor Economics (IZA).
    9. Junxing Chay & Seonghoon Kim, 2022. "Heterogeneous health effects of medical marijuana legalization: Evidence from young adults in the United States," Health Economics, John Wiley & Sons, Ltd., vol. 31(2), pages 269-283, February.
    10. Keshar M. Ghimire & Johanna Catherine Maclean, 2020. "Medical marijuana and workers' compensation claiming," Health Economics, John Wiley & Sons, Ltd., vol. 29(4), pages 419-434, April.
    11. Smart, Rosanna & Doremus, Jacqueline, 2023. "The kids aren’t alright: The effects of medical marijuana market size on adolescents," Journal of Health Economics, Elsevier, vol. 87(C).
    12. Borbely, Daniel & Lenhart, Otto & Norris, Jonathan & Romiti, Agnese, 2022. "Marijuana Legalization and Mental Health," IZA Discussion Papers 15729, Institute of Labor Economics (IZA).
    13. Christian Gunadi, 2022. "Does expanding access to cannabis affect traffic crashes? County‐level evidence from recreational marijuana dispensary sales in Colorado," Health Economics, John Wiley & Sons, Ltd., vol. 31(10), pages 2244-2268, October.
    14. Chu, Yu-Wei Luke & Townsend, Wilbur, 2019. "Joint culpability: The effects of medical marijuana laws on crime," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 502-525.
    15. Anderson, D. Mark & Rees, Daniel I., 2021. "The Public Health Effects of Legalizing Marijuana," IZA Discussion Papers 14292, Institute of Labor Economics (IZA).
    16. Mathur, Neil K. & Ruhm, Christopher J., 2023. "Marijuana legalization and opioid deaths," Journal of Health Economics, Elsevier, vol. 88(C).
    17. Cameron M. Ellis & Martin F. Grace & Rhet A. Smith & Juan Zhang, 2022. "Medical cannabis and automobile accidents: Evidence from auto insurance," Health Economics, John Wiley & Sons, Ltd., vol. 31(9), pages 1878-1897, September.
    18. Johanna Catherine Maclean & Keshar M. Ghimire & Lauren Hersch Nicholas, 2021. "Marijuana legalization and disability claiming," Health Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 453-469, February.
    19. Chu, Yu-Wei Luke & Gershenson, Seth, 2018. "High times: The effect of medical marijuana laws on student time use," Economics of Education Review, Elsevier, vol. 66(C), pages 142-153.
    20. Armstrong, Michael J., 2023. "Relationships between sales of legal medical cannabis and alcohol in Canada," Health Policy, Elsevier, vol. 128(C), pages 28-33.

    More about this item

    Keywords

    Recreational marijuana laws; Labor market outcomes; Employment; Wages;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jopoec:v:38:y:2025:i:2:d:10.1007_s00148-025-01100-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.