Half Banked: The Economic Impact of Cash Management in the Marijuana Industry

Abstract

We investigate the economic consequences of access to banking institutions. To do so, we examine the legal marijuana industry, where only half of businesses have access to cash management services from a financial institution. We quantify the benefits of cash management in terms of differences in wholesale prices, retail prices, sales, and ultimately profitability using administrative and survey data. Firms with cash management receive a 10\% discount on wholesale prices, charge 10\% higher retail prices, and sell more product per transaction for the same product. Through these channels, we find that banking services provide a large economic value to firms.