The Impact of Marijuana's Legalization on Consumption and Sale of Alcohol and Cigarettes: Evidence from the United States

Abstract

This major paper examines the impacts that the legalization of marijuana has on the consumption and sale of alcohol and cigarettes at the individual and state levels. For the individual level analysis, I use data from the Behavioral Risk Factor Surveillance System from 2006-2016. I find an increase of about 0.5% in the number of daily smokers in legalized states in comparison to non legalized states. There is no significant change in alcohol consumption. At the state level, I gather data from 27 state-level Department of Revenues since 2006 and find that cigarette tax revenue dropped by $19.2 million. The estimates are statistically significant at the 10% level. Furthermore, alcohol tax revenue dropped by $18.4 million, but the estimates are not statistically significant. However, an estimated per dollar exchange of $1 of marijuana revenue for 58 cents of alcohol revenue is found and the estimates are statistically significant at the 1% level.