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Exploring the Relationship between Marijuana Policy and Prices

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Project Summary:

Enforcement of criminal laws against the possession of small amounts of marijuana has been a topic of public debate since the early 1970s. Public debate regarding the enforcement costs of current marijuana policy has once again captured the nation’s attention, in part because of the more recent rise in marijuana arrests and in part because use apparently remains undeterred. This has led several states to reconsider their policies toward marijuana, with several states passing legislation reducing the penalties associated with possession of small amounts of marijuana and many more providing legal defenses for individuals who are using marijuana for medicinal purposes. Although a reduction in the legal sanctions associated with marijuana use may reduce the criminal justice burden of the marijuana prohibition, it may increase the social burden of marijuana if use, and in particular harmful use, rises in response to this policy change. Although economic analyses show that marijuana use is sensitive to changes in the legal risk of using marijuana, the effect sizes are fairly small. However, many of these analyses include a measure of price, which may also be influenced by a change in these policies. In this project we will examine the extent to which state marijuana policies influence use indirectly through changes in the monetary price of marijuana. The main objective of the study is to determine whether these demand-side policies impact price and, if so, by how much and in which direction. Two corollary objectives are to (1) identify key factors influencing the price of marijuana in specific markets, and (2) assess the extent to which different data sources convey consistent information regarding trends in prices. This information is critical for policy makers to make informed decisions about the desirability of current depolarization policies being proposed in various states.

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