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Title: Essays in Economic History and Applied Microeconomics
Resulting in 1 citation.
1. Xiong, Heyu
Essays in Economic History and Applied Microeconomics
Ph.D. Dissertation, Department of Economics, Northwestern University, 2019
Cohort(s): NLSY97
Publisher: ProQuest Dissertations & Theses (PQDT)
Keyword(s): Crime; Drug Use; Geocoded Data; Incarceration/Jail; State-Level Data/Policy

Permission to reprint the abstract has not been received from the publisher.

In the last chapter of my dissertation, I study broadly speaking how criminals cope with the loss of their criminal human capital. It is widely hypothesized that legalization disrupts illicit markets and displaces illegal suppliers, but the consequences for those who are displaced remain poorly understood. In this paper, I use comprehensive administrative data on the universe of offenders in three states that legalized marijuana to study the effect of the policy change on the subsequent criminal and labor activity of convicted dealers. I find that marijuana legalization increased the 9-month recidivism rate of marijuana offenders by 5 percentage points relative to a baseline rate of 11 percent. The results are not explained by changes in enforcement. Rather, the increased recidivism is driven by substitution to the trafficking of other drugs, which is consistent with a Becker-style model where individuals develop human capital specific to the drug industry. Using the NLSY97, I show evidence of legalization-induced displacement even amongst non-convicted dealers. In contrast, the transition to formal employment appears much more modest. To learn about potential mechanisms behind these results, I use transaction-level data to estimate the effect of legalization on average prices and price dispersion. I provide suggestive evidence that both the price level and residual variance declined following legalization, consistent with legalization eroding rents earned in the illicit marijuana market. Overall, the results in this paper suggest that an unintended consequence of selective legalization is a re-allocation of drug criminals to other illicit activity.
Bibliography Citation
Xiong, Heyu. Essays in Economic History and Applied Microeconomics. Ph.D. Dissertation, Department of Economics, Northwestern University, 2019.