Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282178 
Year of Publication: 
2023
Series/Report no.: 
Discussion Paper No. 487
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
As illicit substances move into the legal product space, substitution patterns with legal products become more salient. In particular, marijuana legalization may have implications for the use of other legal "sin" goods. We estimate a structural model of multi-product use of illegal and legal substances considering joint use, limited access to illicit products, and persistence in use. We focus on a young person's choice to consume marijuana, alcohol or cigarettes (and possible combinations), and we find that sin goods are complements. Furthermore, our findings emphasize the necessity of accounting for joint consumption and access to obtain correct price sensitivity estimates. Post-legalization, youth marijuana use would increase from 25% to 37%. However, counterfactual results show that a combination of (reasonable) tax increases on all goods along with enforcement against illegal use can potentially revert use to pre-legalization levels. The earlier the tax increases are implemented the more effective they are at curbing future use. Our results inform the policy debate regarding the impact of marijuana legalization on the long-term use of sin goods.
Subjects: 
complementarity
marijuana legalization
limited choice sets
data restrictions
discrete choice models
marijuana legalization
limited choice sets
data restrictions
discrete choice models
JEL: 
C11
D12
L15
K42
H02
L66
C35
Document Type: 
Working Paper

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