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The Effect Of Legalizing Retail Marijuana On Housing Values: Evidence From Colorado

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  • Cheng Cheng
  • Walter J. Mayer
  • Yanling Mayer

Abstract

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)

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  • Cheng Cheng & Walter J. Mayer & Yanling Mayer, 2018. "The Effect Of Legalizing Retail Marijuana On Housing Values: Evidence From Colorado," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1585-1601, July.
    • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:3:p:1585-1601
    DOI: 10.1111/ecin.12556
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    Cited by:

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    2. Thanh Lu, 2021. "Marijuana legalization and household spending on food and alcohol," Health Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 1684-1696, July.
    3. Thomas, Danna & Tian, Lin, 2021. "Hits from the Bong: The impact of recreational marijuana dispensaries on property values," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    4. Carrieri, Vincenzo & Madio, Leonardo & Principe, Francesco, 2019. "Light cannabis and organized crime: Evidence from (unintended) liberalization in Italy," European Economic Review, Elsevier, vol. 113(C), pages 63-76.
    5. Wu, Guangzhen & Wen, Ming & Wilson, Fernando A., 2021. "Impact of recreational marijuana legalization on crime: Evidence from Oregon," Journal of Criminal Justice, Elsevier, vol. 72(C).
    6. John Gardner & Bright Osei, 2022. "Recreational marijuana legalization and admission to the foster‐care system," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1311-1334, July.
    7. Jason Brown & Elior Cohen & Alison Felix, 2023. "Economic Benefits and Social Costs of Legalizing Recreational Marijuana," Research Working Paper RWP 23-10, Federal Reserve Bank of Kansas City.
    8. Mike Langen & Erdal Aydin & Piet Eichholtz & Nils Kok, 2022. "Getting high or getting low? the external effects of coffeeshops on house prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 565-592, June.
    9. Ahmed El Fatmaoui, 2024. "From high school to higher education: Is recreational marijuana a consumption amenity for US college students?," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1024-1045, July.
    10. Jesse Burkhardt & Matthew Flyr, 2019. "The Effect Of Marijuana Dispensary Openings On Housing Prices," Contemporary Economic Policy, Western Economic Association International, vol. 37(3), pages 462-475, July.
    11. Dwayne Marshall Baker, 2024. "Burden or benefit: Is retail marijuana facility siting influenced by LULU- or gentrification-related neighbourhood characteristics?," Urban Studies, Urban Studies Journal Limited, vol. 61(6), pages 1049-1070, May.
    12. Justin Tyndall, 2021. "Getting High and Low Prices: Marijuana Dispensaries and Home Values," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1093-1119, December.
    13. Bruijn, L. Michelle & Ribas, Rafael P., 2022. "“No drugs in my back yard:” The ambivalent reception of cannabis retailers," Journal of Economic Behavior & Organization, Elsevier, vol. 199(C), pages 103-121.

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    More about this item

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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