Light cannabis and organized crime: Evidence from (unintended) liberalization in Italy

Abstract

The effect of marijuana liberalization on crime is object of a large interest by social scientists and policy-makers. However, due to the scarcity of relevant data, the displacement effect of liberalization on the supply of illegal drugs remained substantially unexplored. This paper exploits the unintended liberalization of cannabis light (C-light, i.e. with low THC) occurred in Italy in December 2016 by means of a legislative gap, to assess its effect in a quasi-experimental setting. Although the liberalization interested all the Italian territory, the intensity of liberalization in the short-run varied according to the pre-liberalization market configuration of grow-shops, i.e. shops selling industrial canapa-related products that have been able to first place the canapa flowers (C-light) on the new market. We exploit this variation in a Differences-inDifferences design using a unique dataset on monthly confiscations of drugs at province level (NUTS-3 level) over the period 2016-2018 matched with data on the geographical location of shops and socio-demographic variables. We find that the legalization of C-light led to a reduction of 12% of confiscation of marijuana per each pre-existing grow-shop and a significant reduction of other canapa-derived drugs (plants of cannabis and hashish). Back-to-envelope calculations suggest that forgone revenues for criminal organizations amount to at least 160-200 million Euros per year. These results support the argument that, even in a short period of time and with an imperfect substitute, the organized crime's supply of illegal drugs is displaced by the entry of official and legal retailers.

Do-it-Yourself Medicine? The Impact of Light Cannabis Liberalization on Prescription Drugs

“…Indeed, due to the unannounced liberalization, local availability in the first months after the policy mainly affected those areas previously served by grow shops, that is shops selling seeds and cannabis-related products. As documented elsewhere (e.g., Carrieri et al 2019), these grow shops were mainly concentrated in areas in which industrial cannabis cultivation was more likely due to the geographical and morphological conditions of the territory.…”

“…However, the effect of such forms of liberalization or decriminalization in Europe have been investigated only with respect to their effect on crime (e.g. Carrieri et al 2019;Adda et al 2014). Little is known about the other potential effects stemming from the legal availability of marijuana.…”

“…To identify the causal impact of this unintended liberalization on prescribed drug sales, we exploit the entry of local cannabis shops in 106 NUTS-3 Italian provinces in a staggered differences-in-differences (DiD) framework and we use high-frequency data. As discussed elsewhere (e.g., Carrieri et al 2019), the territorial localization of light cannabis shops was essentially driven by morphological and geographical conditions of the territory that made the cultivation of cannabis crops more suitable. Subsequently, the commercialization of light cannabis flourished at a different pace across provinces.…”

“…A growing stream in the economics literature has documented the effect of such forms of liberalization on a variety of outcomes. General beneficial effects are found on crime (Carrieri et al 2019, Shephard and Blackely 2016, Brinkman and Mok-Lamme 2017 Jacobson 2017, Gavrilova et al 2017, Chu and Townsend 2018, and Dragone et al 2018, and also on the labor supply of older adults (Nicholas and Maclean 2019). More controversial effects or no effects are found on some health-related outcomes such as traffic fatalities (Anderson et al 2013;Hansen et al 2018), teenager use (Lynne-Landsman et al 2013), body weight and obesity (Sabia et al 2017).…”

Legalizing recreational cannabis use: a promising journey into the unknown

“…In 2017, low‐THC cannabis was legalized in Italy as a by‐product of a law that regulated the production and commercialization of hemp. Thus, the use of light cannabis (C‐light) was unintentionally liberalized 6 . This apparently affected both the supply of illegal cannabis and the use of regular prescription drugs.…”