Analysis of the possible economic impacts of the legalization of marijuana and cocaine for recreational use in the Czech Republic (2021)

This diploma thesis analyses the effect of the legalization of cannabis and cocaine for recreational purposes in the territory of the Czech Republic, focusing primarily on the financial returns resulting from taxation and lower costs of enforcing the illegality of these drugs. The theoretical part deals with the relationship between economics and drugs, the consequences of prohibition, the possibility of legalization and the potential taxation of illegal goods. The nature of the hemp market and the history of hemp are described in relation to the hemp industry in the USA. Furthermore, the European cocaine market, cocaine commodity chain and the history of the drug itself are characterized. The primary goal of the work is the calculation of the potential financial contribution to the state budget, this income comes mainly from the taxation of these two properties, savings from repression expenses are also included. The main point of the practical part is the derivation of the total demand for cocaine and cannabis, these demand curves are derived from the results of a questionnaire survey and statistical data. Potential tax revenues from the legalization of cannabis are in the range of 19,5-27,5 billion CZK, and the savings amount to 1.25 billion CZK. For cocaine, tax revenues are estimated at 23,8-27,1 billion, the savings amount to 0.115 billion CZK, there are significantly fewer crimes associated with cocaine.