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The effects of recreational cannabis access on labor markets: evidence from Colorado

Author

Listed:
  • Chakraborty Avinandan

    (Department of Economics, University of New Mexico, 1915 Roma Ave. NE, Albuquerque, NM 87131.)

  • Doremus Jacqueline

    (Department of Economics, Orfalea College of Business, California Polytechnic State University, 1 Grand Ave., San Luis Obispo, CA.)

  • Stith Sarah

    (Department of Economics, University of New Mexico, 1915 Roma Ave. NE, Albuquerque, NM 87131.)

Abstract
Recreational cannabis markets possibly increase labor demand through investments in facilities for growing, processing, and retail sales of cannabis, as well as through other industries such as manufacturing, leisure, and hospitality. However, this increase in labor demand may vary substantially across counties within a state as most states with legal recreational cannabis allow individual counties to ban commercial cannabis sales. Meanwhile, labor supply may change through positive and negative effects from cannabis use. Using county-level Colorado data from 2011 to 2018 and exploiting variation across counties in the existence and timing of the start of dispensary sales, we test for changes in the unemployment rate, employment, and wages, overall and by industry subsector. Consistent with an increase in labor demand, we estimate that the sale of recreational cannabis through dispensaries is associated with a 0.7 percentage point decrease in the unemployment rate with no effect on the size of the labor force. We also find a 4.5% increase in the number of employees, with the strongest effects found in manufacturing. We find no effect on wages. Given the lack of a reduction in labor force participation or wages, negative effects on labor supply are likely limited, in line with the existing literature. The decrease in unemployment, coupled with an increase in the number of employees, indicates that labor demand effects likely dominate effects on labor supply. Our results suggest that policymakers considering recreational access to cannabis should anticipate a possible increase in employment.

Suggested Citation

  • Chakraborty Avinandan & Doremus Jacqueline & Stith Sarah, 2021. "The effects of recreational cannabis access on labor markets: evidence from Colorado," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-86, January.
    • Handle: RePEc:vrs:izajle:v:10:y:2021:i:1:p:86:n:5
    DOI: 10.2478/izajole-2021-0005
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    Cited by:

    1. Gunadi, Christian, 2021. "Does Expanding Access to Cannabis Affect Traffic Crashes? County-Level Evidence from Recreational Marijuana Dispensary Sales in Colorado," GLO Discussion Paper Series 964, Global Labor Organization (GLO).
    2. Rahi Abouk & Keshar M. Ghimire & Johanna Catherine Maclean & David Powell, 2023. "Pain Management and Work Capacity: Evidence From Workers’ Compensation and Marijuana Legalization," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(3), pages 737-770, June.
    3. Ahmed El Fatmaoui, 2024. "From high school to higher education: Is recreational marijuana a consumption amenity for US college students?," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1024-1045, July.
    4. Christian Gunadi, 2022. "Does expanding access to cannabis affect traffic crashes? County‐level evidence from recreational marijuana dispensary sales in Colorado," Health Economics, John Wiley & Sons, Ltd., vol. 31(10), pages 2244-2268, October.

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    More about this item

    Keywords

    cannabis; marijuana; labor demand; manufacturing;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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