RWP 23-10, September 2023; updated June 2024
We analyze the effects of legalizing marijuana for recreational use on state economic and social outcomes using difference-in-differences estimation robust to staggered timing and heterogeneity of treatment. We find moderate economic gains accompanied by some social costs. Post-legalization, average state income per capita grew by 3 percent, house prices by 6 percent, and population by 2 percent. However, substance use disorders, chronic homelessness, and arrests increased by 17, 35, and 13 percent, respectively. Early legalizing states experienced larger economic gains yet similar social costs, implying a potential first-mover advantage.
JEL Classifications: H71, I18, R52
Article Citation
Brown, Jason P., Elior D. Cohen, and Alison Felix. 2023. “Economic Benefits and Social Costs of Legalizing Recreational Marijuana.” Federal Reserve Bank of Kansas City, Research Working Paper no. 23-10, September. Available at External Linkhttps://doi.org/10.18651/RWP2023-10