Liberalizing marijuana has generated debates among the many press, well being officers, legislators, and social activists. Although marijuana is illegitimate beneath federal legal guidelines, 33 states and the District of Columbia have legalized the usage of medical marijuana. While the controversy continues on legalizing marijuana for non-medical use on the state and federal stage, a paper offered on the 2020 Municipal Finance Conference finds that the passage of medical marijuana legal guidelines will increase state authorities borrowing costs.   

In “Marijuana liberalization and public finance: A capital market perspective on a public health policy, Stephanie Cheng, Gus De Franco, and Pengkai Lin of the Freeman School of Business at Tulane University consider the impression of the passage of medical marijuana legal guidelines on municipal bond spreads from 1990 to 2018.   

After controlling for variations in bonds’ contractual options and adjustments in state financial situations, the passage of medical marijuana legal guidelines improves the yield on state borrowing relative to yields on Treasuries of the identical maturity by seven foundation factors (0.07 proportion levels) in comparison with states that don’t. “In dollar terms, MML [medical marijuana laws] increases a state’s interest cost by $7.35 million for the average total issuance amount per year,” the authors calculate. [Read More @ Brookings]

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