Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2015/5: Is Legal Pot Crippling Mexican Drug Trafficking Organizations? The Effect of Medical Marijuana Laws on US Crime

Evelina Gavrilova (), Takuma Kamada () and Floris Zoutman ()
Additional contact information
Evelina Gavrilova: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Takuma Kamada: Division of Behavioral Science, Graduate School of Arts and Letters, Tohoku University, Postal: Graduate School of Arts and Letters, Division of Behavioral Science, Tohoku University, 27-1 Kawauchi Aoba Sendai, JAPAN 980-857
Floris Zoutman: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: We examine the effect of medical marijuana laws (MML) on crime treating the introduction of MML as a quasi-experiment and using three different data sources. First, using data from the Uniform Crime Reports, we find that violent crimes such as homicides and robberies decrease in states that border Mexico after MML are introduced. Second, using Supplementary Homicide Reports' data we show that for homicides the decrease is the result of a drop in drug-law and juvenile-gang related homicides. Lastly, using STRIDE data, we show that the introduction of MML in Mexican border states decreases the amount of cocaine seized, while it increases the price of cocaine. Our results are consistent with the theory that decriminalization of small-scale production and distribution of marijuana harms Mexican drug trafficking organizations, whose revenues are highly reliant on marijuana sales. The drop in drug-related crimes suggests that the introduction of MML in Mexican border states lead to a decrease in their activity in those states. Our results survive a large variety of robustness checks. Extrapolating from our results, this indicates that decriminalization of the production and distribution of drugs may lead to a drop in violence in markets where organized crime is pushed out by licit competition.

Keywords: Cannabis Legalization; Decriminalization; Crime

JEL-codes: H00; K00; K42

32 pages, January 19, 2015

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