Not in My Backyard? Not so Fast. The Effect of Marijuana Legalization on Neighborhood Crime

This paper studies the effects of marijuana legalization on neighborhood crime using unique geospatial data from Denver, Colorado. We construct a highly local panel data set that includes changes in the location of marijuana dispensaries and changes in neighborhood crime. To account for endogenous retail dispensary locations, we use a novel identification strategy that exploits exogenous changes in demand across different locations. The change in geographic demand arises from the increased importance of access to external markets caused by a change in state and local policy. The results imply that retail dispensaries lead to reduced crime in the neighborhoods where they are located. Reductions in crime are highly localized, with no evidence of benefits for adjacent neighborhoods. The spatial extent of these effects are consistent with a policing or security response, and analysis of detailed crime categories provides indirect evidence that the reduction in crime arises from a disruption of illicit markets