The Impact of Marijuana Legalization on Medical Marijuana Enrollment: The Case of Colorado

• In Event: What Happens After Legalization?: The Role of Cannabis Policy in Markets, Policing, Youth, and Patient Health

Abstract

This study examines whether expanded access to recreational marijuana under Recreational Marijuana Laws (RMLs) induces substitution away from regulated medical marijuana programs. As more U.S. states legalize recreational cannabis, understanding how these parallel markets interact is central to evaluating the broader consequences of marijuana policy reform for public health, regulatory oversight, and state tax revenues. In particular, if recreational legalization substantially crowds out participation in medical marijuana programs, policymakers may need to reconsider the design, monitoring, and justification of medical systems that were originally established to ensure patient access for therapeutic use.

Using county-level panel data from Colorado—one of the earliest adopters of recreational legalization—I exploit plausibly exogenous variation in the timing and intensity of recreational marijuana retail entry to estimate the relationship between retail availability and enrollment in the state’s medical marijuana registry. The empirical strategy leverages cross-county differences in when recreational retailers begin operating and how densely they subsequently enter local markets, generating variation in consumer access over time. I estimate two-way fixed effects (TWFE) difference-in-differences models to quantify the average effect of retail openings and retailer density on medical marijuana enrollment, controlling for county and year fixed effects as well as relevant time-varying demographic and economic covariates. TWFE estimates indicate that both the initial opening and the increasing density of recreational marijuana retailers are associated with modest but persistent declines in medical marijuana enrollment. However, estimates obtained using recently developed difference-in-differences approaches that are robust to treatment effect heterogeneity and staggered policy adoption yield effects that are directionally similar but smaller in magnitude and not statistically distinguishable from zero.

Overall, the findings suggest limited institutional substitution from medical to recreational marijuana markets following legalization. More broadly, the results underscore the importance of estimator choice when evaluating staggered policy reforms and contribute to a growing literature on the behavioral, institutional, and market-level effects of marijuana legalization.

Author

• Thao P Pham, University of Illinois at Chicago
  Presenting Author