How Does the Legalization of Recreational Marijuana Affect Alcohol Consumption in the United States?

This study empirically assesses how the legalization of recreational marijuana impacts statewide alcohol consumption. As the spillover effects of recreational marijuana laws (RMLs) continue to divide citizens, economists, and policymakers alike, there is a growing interest in the potential implications on consumer behaviors and preferences. Alcohol, similar to marijuana in being a substance with significant rates of abuse, is particularly worthy of investigation in this context. With a microeconomic focus on substitute versus complementary goods, an examination of whether alcohol consumption metrics increase or decrease in states that adopt RMLs, relative to states that do not, could largely contribute to their perception of benefit or harm. Considering this dynamic, this study implements a staggered difference-in-difference analysis, to account for varying years of legalization among treated states. This model utilizes state-level alcohol consumption data, with tax revenue as a robustness measure, from the years 2004-2021 among all 50 states and the District of Columbia. The estimates ultimately find that among all alcoholic beverages there is not a substitute or complementary relationship, but when broken into subcategories of alcohol, beer does display a complementary relationship. However, this effect is likely to be isolated to the young male population, which does not outweigh rival alcohol-consuming demographics. It is also estimated that tax revenue from alcohol is not overwhelmingly affected in a negative way. As such, this result would support an argument in favor of states streamlining the legalization of recreational marijuana.