Getting Low from Getting High? The External Effects of Coffee Shops on House Prices


The legalization of cannabis is a hotly contested policy topic. While beneficial to some, cannabis dispensaries may create negative externalities for others. This paper studies the external effects of coffeeshops – Dutch cannabis sales facilities – on local house prices. We employ a difference-in-difference analysis and a repeat sales analysis around a change in regulation, leading to exogenous coffeeshop closings. We document that coffeeshop closings have negative effects on home values. Compared to homes nearby remaining coffeeshops, homes nearby closing coffeeshops decrease on average 1.6 to 7.8 percent in value. The findings are robust to sub-tests and unaffected by the subsequent use of coffeeshop location.



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