Does legalization of marijuana increase the consumption of tobacco?

By | 18.9.2016

It has been a tricky question for such a long period of time: are marijuana and tobacco substitutes or complements? Leaving the economic terminology aside: do people tend to use tobacco and marijuana at the same time or do they rather alternate between the two? Since several states in the US have recently agreed to legalize (medical) marijuana use, economists were finally given the opportunity to collect and study US data about consumption habits of both.

Having gathered the data, Anna Choi, Dhaval Dave, and Joseph J. Sabia ran a difference-in-differences regression with the aim to estimate whether and to what extent the legalization of marijuana affects the consumption of cigarettes. The empirical results suggest that after the legalization of marijuana the consumption of cigarettes tends to decrease. In other words, tobacco and marijuana seem to be substitutes. If the results prove to be right, it may have important implications for policy-makers. For example, an increase in tax burden levied on tobacco might increase the demand for marijuana. Or, on the contrary, legal usage of marijuana might decrease the sales of tobacco products and thus decrease the amount of taxes collected from tobacco.

Reference: Choi, A., Dave, D., & Sabia, J. J. (2016). Smoke Gets in Your Eyes: Medical Marijuana Laws and Tobacco Use (No. w22554). National Bureau of Economic Research. Available here.

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