Illicit drug use and labour force participation: a simultaneous equations approach

Empirical research on the relationship between illicit drug use and labour market success has been found to have mixed results in the literature. Relevant sources of variability are the methods used to account for the potential endogeneity of drug use. Using clinical data of drug users, this paper utilizes a recursive simultaneous-equations approach as an alternative for estimating the effect of consumption on labour participation and control the endogeneity problem. Our results confirm that drug use is endogenously determined, and provides evidence to support that frequent use of dependency drugs greatly decreases the likelihood of be in work. The results derive here show the potentially labour market-related costs of drug use and abuse, mainly in terms of production loss.