Abstract:
Despite federal prohibition, recreational marijuana is available to 21% of the United States population. A chief concern among policy makers across multiple levels of government and political parties is inter-state diversion of marijuana from states with legal markets to others. We measure this diversion with a natural experiment. Oregon opened a recreational market on October 1, 2015, next to an existing market in Washington, which opened on July 8, 2014. Using comprehensive administrative data on the universe of Washington sales, we find Washington retailers along the Oregon border experienced a 41% decline in sales immediately following Oregon's market opening. Retailers along Washington's borders with Idaho and Canada experienced no such decline. The decline occurred equally across weekdays and weekends, and was largest among the largest transaction sizes, suggesting diversion, not drug tourism, was to blame. Our estimates suggest that 11.9% of the marijuana sold in Washington was diverted out of the state before Oregon legalized and
7.5% remains diverted today.
A gated copy of the research paper can be found here.
