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Marijuana Liberalization and Public Finance

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Marijuana Liberalization and Public Finance

A Capital Market Perspective on a Public Health Policy

Brookings Institution,

5 min read
3 take-aways
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What's inside?

The economic impacts of the legalization of marijuana in the United States are complex.

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  • Analytical
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Advocates and opponents of marijuana legalization in the United States continue to debate its social and health merits. But the economic outcomes of cannabis decriminalization remain largely undiscussed. In this detailed research report, scholars Stephanie F. Cheng, Gus De Franco and Pengkai Lin conduct a thorough examination of the financial effects on those states that enact medical marijuana laws (MML), and they uncover how MML affect the states’ costs of borrowing in the capital markets. With US marijuana consumption growing, users and nonusers will find this an informative analysis.


States with medical marijuana laws (MML) experience notable increases in usage.

Marijuana use in the United States skyrocketed by 45% between 2002 and 2018, despite the fact that the federal government classifies marijuana as an illegal substance. But 33 states and the District of Columbia have enacted medical marijuana laws (MML) since 1996, when California passed the first MML. Between 2012 and 2018, 10 states and DC also approved the recreational use of cannabis.

The recognition of marijuana as a medical treatment increases its supply and public acceptance while reducing its cost. Illegal use rises along with its consumption for medical purposes. MML states see substantially higher marijuana...

About the Authors

Stephanie F. Cheng is an assistant professor at the Freeman School of Business at Tulane University, where Gus De Franco is a professor and Pengkai Lin is a PhD student.

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