The Effect of the Endogenous Entry of Retail Marijuana Stores on Housing Prices in California

Abstract

While the majority of US states have established medical marijuana programs, only 18 states and Washington D.C. have legalized retail marijuana sales. Proponents of legalizing retail marijuana argue that legalization decreases healthcare costs, immense therapeutic potential, increased tax revenue, increased property values, reduces costs of marijuana-related crime enforcement, and general economic growth. On the other hand, opponents of legalizing retail marijuana argue that legalization increases marijuana-related traffic accidents, increases healthcare costs, increases the likelihood of mental health disorders, and lowers workplace productivity. This thesis focuses on the impact of retail marijuana on housing prices because of the limited literature on this topic and the possibly significant consequences on tax revenue. I use a difference-in-differences model similar to that developed by Conklin et al. (2017), and I find that the price effect of retail marijuana stores is heavily skewed by sale price outliers, properties sold for unusually low or high prices. I compare my results similar papers from Conklin et al. (2017) and Won (2021) and provide possible explanations for the differences in results. I also discuss possible areas for future research regarding retail marijuana and housing prices.