"Recreational Cannabis Legalization and Alcohol Purchasing: A Difference-in-Differences Analysis"

The title of this post is the title of this notable new research by Collin Calvert and Darin Erickson now available via SSRN. Here is its abstract:

Background:  Whether recreational cannabis legalization is associated with changes in alcohol consumption (suggesting a potential substitution or complementary relationship) is a key question as cannabis policy evolves, particularly given the adverse health and social effects of alcohol use.  Relatively little research has explored this question.

Methods:  This study examined the association between recreational cannabis legalization and alcohol purchasing in the U.S. using an interrupted time series design. We used data from the Nielsen Consumer Panel (2004-2017) from 69,761 households in all 50 states to calculate monthly milliliters of pure ethanol purchased for four beverage categories (beer, wine, spirits, and all alcohol products). We used difference-in-differences models and robust cluster standard errors to compare changes in milliliters of pure ethanol purchased.  We fit models for each beverage category, comparing three “policy” states that have legalized recreational cannabis (Colorado, Oregon, and Washington) to states that had not legalized recreational cannabis.  In one set of models, a single control state was selected that matched pre-policy purchasing trends in the policy states.  In another set, policy states were compared to all states that had not legalized recreational cannabis.

Results:  Compared to all other states that did not legalize recreational cannabis, Colorado households showed a 13% average monthly decrease in purchases of all alcoholic products combined (estimate: 0.87; CI: 0.77, 0.98) and a 6% decrease in wine (0.94; CI: 0.89, 0.99).  Estimates in Washington were suggestive of an increase in spirits purchased in both the unrestricted (1.24; CI: 1.12, 1.37) and restricted sample (1.18; CI: 1.02, 1.36).  Oregon showed a significant decrease in monthly spirits purchased when compared to its selected comparator state (0.87; CI: 0.77, 0.99) and to all other states without legalized recreational cannabis (0.85; CI: 0.77, 0.95).

Conclusions:  Results suggest that alcohol and cannabis are not clearly substitutes nor complements to one-another.  Future studies should examine additional states as more time passes and more post-legalization data becomes available, use cannabis purchase data and consider additional methods for control selection in quasi-experimental studies.