Marijuana on main street: What if?
Illicit drug use is prevalent around the world. While the nature of the market makes it difficult to determine the total sales worldwide with certainty, estimates suggest sales are around $150 billion a year in the United States alone. Among illicit drugs marijuana is the most commonly used, where the US government spends upwards of $7.7 billion per year in enforcement of the laws for marijuana sales (Miron, 2005). For the past 30 years there has been a debate regarding whether marijuana should be legalized. There are two important avenues through which legalization could impact use: legalization would make marijuana easier to get, and it would remove the stigma (and cost) associated with illegal behavior. Studies to date have not disentangled the impact of limited accessibility from consumption decisions based solely on preferences. However, this distinction is particularly important in the market for cannabis as legalizing the drug would impact accessibility. Hence, if most individuals do not use because they don't know where to buy it, but would otherwise use, we would see a large increase in consumption ceteris paribus, which would be important to consider for policy. On the other hand, if accessibility plays little role in consumption decisions, then making drugs more readily available would impact the supply more. In order to access the impact of legalization on use, it is necessary to explicitly consider the role played by accessibility in use, the impact of illegal actions in utility, as well as the impact on the supply side. In this paper, we develop and estimate a model of buyer behavior that explicitly considers the impact of illegal behavior on utility as well as the impact of limited accessibility (either knowing where to buy or being offered) an illicit drug on using the drug. We use the demand side estimates to conduct counterfactuals on how use would change under a policy of legalization. We conduct counterfactuals under di¤erent assumptions regarding how legalization would impact the supply as well as various tax policies on the price of cannabis.
|Date of creation:||Jul 2012|
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- Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2012.
"A Search-Theoretic Model of the Retail Market for Illicit Drugs,"
Review of Economic Studies,
Oxford University Press, vol. 79(3), pages 1239-1269.
- Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2009. "A Search-Theoretic Model of the Retail Market for Illicit Drugs," NBER Working Papers 14980, National Bureau of Economic Research, Inc.
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- van Ours, J.C., 2003. "Is cannabis a stepping stone for cocaine?," Other publications TiSEM c1213d1c-a542-4627-938c-7, Tilburg University, School of Economics and Management.
- van Ours, Jan C, 2001. "Is Cannabis a Stepping-Stone for Cocaine?," CEPR Discussion Papers 3116, C.E.P.R. Discussion Papers.
- Michelle Sovinsky Goeree, 2005. "Advertising in the US Personal Computer Industry," Industrial Organization 0503002, EconWPA.
- Kannika Damrongplasit & Cheng Hsiao, 2009. "Decriminalization Policy And Marijuana Smoking Prevalence: A Look At The Literature," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(04), pages 621-644.
- Kenneth W. Clements, 2006. "Pricing and Packaging: The Case of Marijuana," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2019-2044, July.
- Kenneth W. Clements, 2004. "Pricing and Packaging: The Case of Marijuana," Economics Discussion / Working Papers 04-03, The University of Western Australia, Department of Economics.
- Edward L. Glaeser & Andrei Shleifer, 2001. "A Reason for Quantity Regulation," American Economic Review, American Economic Association, vol. 91(2), pages 431-435, May.
- Damrongplasit, Kannika & Hsiao, Cheng & Zhao, Xueyan, 2010. "Decriminalization and Marijuana Smoking Prevalence: Evidence From Australia," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(3), pages 344-356. Full references (including those not matched with items on IDEAS)
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