Marijuana De-regulation and Automobile Accidents: Evidence from Auto Insurance

The legal status of marijuana has experienced a radical transformation over the past two decades. Prior to 1996, marijuana was illegal in the United States. Then, California started a trend that has seen marijuana legalized for medical purposes in 33 states and additionally for recreational purposes in 9 of those. While the public benefits of legalizing marijuana are well-documented, much of the potential public detriment remains under-studied. We focus on one potential detriment – the effect of marijuana legalization on automobile safety. Experimental studies show that marijuana negatively impacts driving ability. Given this, it is natural to assume that increasing access to marijuana would lead to an increase in car accidents, but the reality is unclear. Alcohol by itself is more detrimental to driving than the use of marijuana by itself. If marijuana and alcohol are substitutes, then lowering the absolute price of marijuana could lead people away from alcohol and, even with an increase in marijuana-related accidents, the total number of accidents could be reduced. We pair a dispensary dataset constructed from official state dispensary registries with auto insurance data from National Association of Insurance Commissioners' (NAIC) Property-Liability database and zip-code level survey data on auto insurance premiums from the S&P Global Market Intelligence database.

We exploit the geographic discontinuity between contiguous zip codes across MML and non-MML states and use a difference-in-differences approach to examine the effect of a marijuana dispensary on auto insurance premiums. We find that the legalization of medical marijuana leads to a decrease in auto insurance premiums of $5.20 per policy per year. This effect is stronger in areas close to a dispensary. We find limited evidence that the reduction is due to a decrease in drunk driving following marijuana legalization.