Tiffanie Perrault

To what extent do cannabis legalization policies undermine the black market? I assemble a novel dataset on US city-level prices and THC potencies, used as proxies for quality, in both prohibition and legalization environments. I employ difference-in-difference and event-study designs and show that legalizing recreational cannabis results in an immediate and significant drop in equilibrium prices (up to 18%), as well as a delayed and limited (up to 2%) increase in equilibrium quality. This effect on price is driven by medium-potency products experiencing significant decreases in price, whereas the price of the most potent products increases ex-post. This heterogeneity suggests that legalization selects high-potency products on the black market. While the empirical literature has overlooked consumer preferences for cannabis quality, policy design cannot ignore this dimension. To better understand how quality affects the demand and supply of cannabis, I complement the analysis by evaluating a structural model that accounts for quality, combining administrative data on legal prices and consumption microdata for the state of Washington. Cross-price elasticities of consumption between legal and illegal cannabis are relatively small. However, changes in THC potency lead to sensible substitution between the two products. Counterfactual analysis suggests that high-quality provision is a credible tool to drive illegal retailers out of the market.

We model cannabis consumption in risky environments under prohibition and legalization. Combining legalization with penalties against agents on the illegal market, as well as improved quality on the legal market can control post-legalization consumption while undermining the illegal market. Data from the US illustrates the efficacy of such policy, pinpointing issues in recent legalization policies and proposing improved strategies.

Can we undermine human smuggling and control immigration? We model the supply of human smuggling services and the demand from workers in low wage countries. We suggest employing regulated temporary visas to eliminate smugglers and fulfill labor needs in host countries. Using migration data, we compute 'eviction' prices for visas and study subsequent changes in migration flows. Our findings reveal government constraints in preventing worker overstays, particularly on South-North routes.