Abstract

This study provides the first county-level analysis on the employment and wage effects of medical marijuana laws (MMLs). Since traditional state-level difference-in-differences analyses might not fully capture unobserved heterogeneity in changes in the local labor markets, we employ a border discontinuity design to improve the comparability between the treated and control groups. Specifically, we compare changes in employment and wages between contiguous border counties of neighboring states with and without MMLs. Using county-quarter level data from the 1990-2012 Quarterly Census of Employment and Wages, we find that MMLs are associated with a 1.5 percent decline in wages. We also find that the wage effect occurs with a two-year lag and appears to be more pronounced in the trade, transportation, and utilities sectors. However, the estimates of the effect of MMLs on employment counts are imprecise. Finally, our additional analysis provides suggestive evidence that MMLs are associated with a modest increase in labor market slack, which could potentially explain the wage decline in the absence of employment adjustment.

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