Sunday, December 13, 2020
The title of this post is the title of this notable new paper now on SSRN authored by Elizabeth Berger and Nathan Seegert. Here is its abstract:
We investigate the economic effects of cash management services that banks and credit unions offer in the legal marijuana industry, where only half of businesses have access to cash management services. Administrative data from Washington state on marijuana sales, data on financial institutions, and our hand-collected survey on marijuana dispensaries allow us to investigate product-level effects. Dispensaries with cash management services have 40% higher profitability, and we find that this is due to reduced frictions with upstream suppliers. Specifically, dispensaries with cash management negotiate 10% lower wholesale prices. Through this channel, we find banking services provide large economic value.