Colorado Amendment 64: Examining The spillover effect of recreational Marijuana retail on labor productivity

Abstract

The spillover effect of the initiation of recreational marijuana retail activity on labor productivity remains to be an important topic despite the increasing number of studies that show the positive and negative effects of such type of policy shifts. In the case of the Colorado Amendment 64, studies have found multiple results for the several implications of this policy shift on crime, tax revenue benefits, safety, mortality, and drug dependence exacerbation. However, not until recently, the effect of policy shifts of recreational marijuana sale status on labor productivity has been empirically measured. Common narrative has associated the policy changes around marijuana to potential negative impact on labor productivity, both at the extensive and intensive margin. Moreover, current literature on the topic of recreational marijuana policy changes lacks evidence on the potential spatial dynamics existing between areas that might play a major role in inter-regional economic growth. Spatial spillovers represent a functioning and dynamic mechanism through which areas next to each other can be affected by the policy changes their neighbors undertake. In this study, I apply Spatial Difference-in-Difference to estimate the spillover effect of recreational marijuana retail activity on labor productivity. The results suggest that the recreational marijuana retail activity has an average indirect impact of approximately $1,676 USD, indicating that spillover effects are far from negligible and neglecting them lead to undermined results of the real economic impact of the recreational marijuana retail activity.