The Effect of State Marijuana Legalizations

In November 2012, Colorado and Washington approved ballot initiatives that legalized marijuana for recreational use under state law. Since then, nine additional states (Alaska, Oregon, California, Nevada, Maine, Vermont, Massachusetts, Michigan, and Illinois) plus the District of Columbia have followed suit, either by ballot initiative or legislative action. Voters in four other states (New Jersey, South Dakota, Arizona, and Montana) approved state ballot measures legalizing marijuana for personal use in the November 2020 election.

Supporters and critics make numerous claims about state‐​level marijuana legalizations. Advocates suggest that legalization reduces crime, raises tax revenue, lowers criminal justice expenditures, improves public health, increases traffic safety, and stimulates the economy. Critics argue that legalization spurs marijuana and other drug or alcohol use, increases crime, diminishes traffic safety, harms public health, and lowers teen educational achievement.
In previous work, we found that the strong claims made by both advocates and critics are substantially overstated and in some cases entirely without support from existing legalizations; mainly, state legalizations have had minor effects. This paper updates previous work to account for additional years of data and the increase in the number of states with legalized marijuana. Our conclusions remain the same, but our assessments of legalization’s effects remain tentative because of limitations in the data. The existing data nevertheless provide a useful perspective on what other states should expect from legalization or related policies.

History of State‐​Level Marijuana Legalizations

Until 1913, marijuana was legal throughout the United States under both state and federal law.16 Beginning with California in 1913 and Utah in 1914, however, states began outlawing marijuana, and by 1930, 30 states had adopted marijuana prohibition. Those state‐​level prohibitions stemmed largely from anti‐​immigrant sentiments and particularly from racial prejudice against Mexican migrant workers, who were often associated with the use of the drug. Prohibition advocates attributed terrible crimes to marijuana and the Mexicans who smoked it, stigmatizing marijuana use and the purported “vices” that resulted from it.17 Meanwhile, film productions, such as the 1936 movie Reefer Madness, presented marijuana as “Public Enemy Number One” and suggested that its consumption could lead to insanity, death, and even homicidal tendencies.18

Starting in 1930, the Federal Bureau of Narcotics pushed states to adopt the Uniform State Narcotic Drug Act and to enact their own measures to control marijuana distribution.19 In 1937, Congress passed the Marihuana Tax Act, which effectively outlawed marijuana under federal law by imposing a prohibitive tax; stricter federal laws followed.20 The 1952 Boggs Act and the 1956 Narcotics Control Act established mandatory sentences for drug‐​related violations; a first‐​time offense for marijuana possession carried a minimum sentence of 2–10 years in prison and a fine of up to $20,000.21 While those mandatory sentences were mostly repealed in the early 1970s, President Ronald Reagan reinstated them under the Anti‐​Drug Abuse Act of 1986. The current federal legislation controlling marijuana possession, use, and distribution is the Controlled Substances Act, which was published in 1971 and classifies marijuana as a Schedule I drug. This category is for drugs that, according to the Drug Enforcement Administration, have “no currently accepted medical use and a high potential for abuse” as well as a risk of creating “severe psychological and/​or physical dependence.”22

Despite this history of increasingly draconian federal action against marijuana (and other drugs), individual states have been backing away from marijuana prohibition since the 1970s. Eleven states decriminalized the possession or use of limited amounts of marijuana between 1973 and 1978, including, in chronological order, Oregon, Alaska, California, Colorado, Maine, Minnesota, Ohio, Mississippi, New York, North Carolina, and Nevada.23 However, not all states followed such a straightforward path toward marijuana liberalization. Alaska, for example, decriminalized marijuana use and possession in one’s home in 1975, but in 1990, a voter initiative recriminalized possession and use of marijuana. A second decriminalization wave began when Nevada defelonized marijuana possession in 2001; 19 more states and the District of Columbia have since adopted similar reforms.24 By the mid‐​1990s, amid mounting scientific evidence pointing to marijuana’s potential medicinal benefits—including treating chronic pain, glaucoma, Alzheimer’s, Parkinson’s, epilepsy, and other medical conditions—various states began to legalize medical marijuana but restricted access only to patients who satisfied strict criteria.25 Over the past two decades, 33 states and the District of Columbia have legalized marijuana for medical purposes, significantly expanding the number of patients eligible for medical marijuana prescriptions. In some states, these medical regimes approximate de facto legalization.26

The most dramatic cases of states undoing earlier prohibitions and departing from federal policy have occurred in those states that have legalized marijuana for recreational as well as medical purposes (Colorado, Washington, Oregon, Alaska, California, Nevada, Maine, Massachusetts, Illinois, Michigan, and Vermont). Nearly every state that has legalized marijuana thus far has done so through citizen‐​driven ballot initiatives. After formally legalizing marijuana, states normally take one to two years to set up regulatory regimes, establish licensing guidelines, and impose marijuana taxes; only then can the first marijuana shops open.

In the 2020 elections, more states’ ballots included measures to liberalize their marijuana laws. New Jersey, South Dakota, Arizona, and Montana passed ballot measures legalizing marijuana for recreational use. Mississippi and South Dakota voters likewise approved ballot measures legalizing medical marijuana. As of November 2020, the Marijuana Policy Project listed 23 states with bills to legalize marijuana, 14 with bills to decriminalize marijuana, and 12 with bills to create medical marijuana programs.27

Although states’ paths differ in some ways, most follow a pattern of first decriminalizing, then medicalizing, and then legalizing. One exception is Michigan, which did not decriminalize marijuana statewide prior to legalizing medical marijuana—although many cities had adopted local decriminalization laws by that time.28 Another is Vermont, which legalized medical marijuana in 2004, nine years before decriminalizing it in 2013.29 For states following the usual decriminalize‐​medicalize‐​legalize pattern, their experiences with decriminalization and medical legalization inform the expected effects of total legalization, since these partial measures often serve as steps toward that end.

Key Dates

To determine the effects of legalization and other policy changes on marijuana use, we examine the trends before and after the changes. We focus on recreational marijuana legalizations, because earlier work has covered other marijuana policy modifications, such as medicalization.30

The specific statewide legalizations we consider are Colorado (2012), Washington (2012), Oregon (2014), Alaska (2014), California (2016), Nevada (2016), Maine (2016), Massachusetts (2016), Vermont (2018), Michigan (2019), and Illinois (2020).

Our analysis examines whether the trends in marijuana use and related outcomes changed substantially after these dates. We consider trends in alcohol and drug use, suicides, crime, traffic fatalities, and economic conditions. Any observed changes may, however, be due to other factors and do not necessarily implicate marijuana policy. Similarly, an absence of changes does not prove that policy changes had no effect; a confounding variable operating in the opposite direction might have approximately offset the policy change.

Economic Outcomes

Economic and demographic outcomes are unlikely to be significantly affected by marijuana legalization, simply because marijuana commerce is a small part of the overall economy. Nevertheless, to give a holistic account of the possible outcomes of marijuana legalization, we consider its economic potential.

Before legalization, advocates in many states thought legalization could produce an influx of new state residents, particularly young individuals who might be enticed to move across state lines to take advantage of looser marijuana laws.64 News articles reported housing prices in Colorado (particularly around Denver) soaring at growth rates far above the national average, perhaps as a consequence of legalization.65 One analyst went so far as to say that marijuana had essentially “kick‐​started the recovery of the industrial market in Denver” and led to record‐​high rent levels.66

Figure 10 in the Appendix sheds doubt on these claims by presenting the difference between the Case‐​Shiller Home Price Indices for major cities in legalizing states (Denver; Seattle; Portland, Oregon; San Francisco and Los Angeles; Las Vegas; Detroit; Chicago; and Boston) and the national average.67 Only Portland displays any upward trend post‐​legalization. Whereas some people may have moved across state lines for easier access to legal marijuana, any resulting growth in population has been small and is unlikely to cause noticeable increases in housing prices or total economic output.

Advocates also argue that legalization boosts economic activity by creating jobs in the marijuana sector, including “marijuana tourism” and other support industries, thereby boosting economic output. According to the data in Figure 11 (see the Appendix), which illustrates state employment to population ratios compared with the national average, states that legalized marijuana experienced no discernable change in employment after legalization. Some states saw increases in employment (Massachusetts, Nevada); others saw a decrease (Vermont, Alaska, Illinois, Maine); others tended to follow existing trends (Colorado, Washington, Michigan, California). Marijuana production and commerce do employ many thousands of people, but the employment gains seen in the wake of legalization are still modest compared with the overall size of each state’s workforce.68

Figure 12 in the Appendix compares state and national gross domestic product growth rates in the years before and after legalization.69 Some states experienced slight relative improvements following legalization (Colorado, Oregon, Washington, Nevada, Alaska), but generally the trends are flat post‐​legalization.

Budgetary Impacts

One area where marijuana legalization has a significant impact is through increasing state tax revenue. Colorado, Washington, Oregon, and California all impose significant excise taxes on recreational marijuana, along with standard state sales taxes, other local taxes, and licensing fees. As seen in Figure 13, Colorado now collects almost $20 million per month from recreational marijuana alone.70 In 2015, the state generated a total of $135 million in recreational marijuana revenue. These figures exceed some pre‐​legalization forecasts, although revenue growth was sluggish during the first few months of sales.71 A similar story unfolded in Washington, where recreational marijuana generated approximately $70 million in tax revenue in the first year of sales—double the original revenue forecast.72 Oregon, which began taxing recreational marijuana only in January 2016, has reported revenues of $10 million per month, far above the initial estimate of $2 million to $3 million for the entire calendar year.73 California collects more than $50 million in monthly tax revenues from recreational marijuana. The tax revenues in these states, however, may moderate as more states legalize marijuana. For example, Benjamin Hansen, Keaton Miller, and Caroline Weber estimate that Washington’s dispensaries along the Oregon border experienced a significant decline in sales once Oregon’s dispensaries opened.74


Limited post‐​legalization data prevent us from ruling out that marijuana legalization causes small changes in marijuana use or other outcomes. As additional data become available, expanding this analysis will continue to inform debates surrounding marijuana reform. The data so far, however, provide little support for the strong claims about legalization made by either opponents or supporters; the notable exception is tax revenue, which has exceeded some expectations. The absence of significant adverse consequences is especially striking given the sometimes‐​dire predictions made by legalization opponents.