Premium
THE EFFECT OF LEGALIZING RETAIL MARIJUANA ON HOUSING VALUES: EVIDENCE FROM COLORADO
Author(s) -
Cheng Cheng,
Mayer Walter J.,
Mayer Yanling
Publication year - 2018
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12556
Subject(s) - legalization , property value , economics , value (mathematics) , exploit , residential property , public economics , finance , law , economic geography , computer security , real estate , machine learning , political science , computer science
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)