During the 1970s, the Netherlands, unlike neighboring European countries, initiated the decriminalization of marijuana and alternative soft drugs under a pragmatic perspective of the issue of drugs within society. However, this policy of toleration of the commercial and recreational usage of marijuana through establishments nicknamed coffee shops has led to a new form of tourism - drug tourism. While drug tourism has provided the governmental authorities of the Netherlands with a lucrative revenue stream, the existence of coffee shops does come with various negative externalities. The growing issue of nuisance experienced by municipal residents led to a stricter drug policy in the early 2000s to reduce the issue of nuisance caused by drug tourism, especially within the Southern provinces of the Netherlands which form an attractive location for drug tourists of neighboring European countries. In order to combat the issue of drug tourism within these municipalities, the governmental authorities of the Netherlands revised the existing drug policy to include a resident criterion where coffee shops would only be able to sell recreational marijuana to local municipal residents.
The aim of this study is thus to determine whether the revision to the 2012 drug policy within the Southern provinces of the Netherlands had an effect on the rate of drug crimes committed within so-called coffee shop municipalities and the subsequent result of banning drug tourism on the local economy. To measure the impact on drug violations within affected Southern coffee shop municipalities, this paper applies propensity score matching (PSM) in combination with Difference-in-Differences (DD) using public crime data on municipal level from the StatLine database and economic data on firm level from the MicroData database, both of which are maintained by the Dutch Bureau of Statistics (CBS). Estimates from the PSM-DD model suggests that the implementation of the drug policy in 2012 led to a reduction in committed soft drug violations but no significance was found for hard drug violations. As for the economic impact by banning drug tourism, preliminary analysis indicates no significant impact on firms located within affected Southern coffee shop municipalities after controlling for firm and municipal characteristics.