Tracking Marijuana in the National Accounts

The internationally agreed guidelines for national economic accounts, System of National Accounts 2008 (United Nations Statistics Division 2008), explicitly recommend that illegal market activity should be tracked together with legal market activity. This recommendation is not currently implemented by the U.S. Bureau of Economic Analysis (BEA) because of challenges inherent in identifying suitable source data and differences in conceptual traditions (Carson 1984a and 1984b). Previous research studied how tracking four broad categories of illegal activity might impact aggregate economic statistics (Soloveichik 2019). This paper focuses on how tracking the narrow category of marijuana might impact the aggregate national accounts, the industry accounts, and the regional accounts. In aggregate, tracking marijuana raises the level of nominal gross domestic product (GDP) by 0.2 percentage point in 2019, raises real GDP growth between 2010 and 2019 by 0.05 percentage point per year, and raises measured productivity growth between 2010 and 2019 by 0.06 percentage point per year. By industry, measured nominal value-added in 2019 increases by $4 billion for the farm sector, $8 billion for the food, beverage, and tobacco manufacturing sector, and $37 billion for the retail sector. By state, measured nominal value-added in 2019 increases by $9 billion for California, $3 billion for New York, and by a smaller amount in states with a lower total state GDP or a less intense marijuana culture.