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The Effect of Illicit Drug Use on the Wages of Young Adults

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Author Info
Robert Kaestner

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Abstract

This paper examines the effects of cocaine and marijuana use on the wages of a sample of young adults drawn from the NLS Youth Cohort. The endogeneity of drug use in a wage equation is considered and a 2SLS procedure is implemented. The rather surprising results suggest that for this sample, increased use of marijuana or cocaine is associated with higher wages. The positive relationship between drug use and the wage does not diminish with age, but remains substantially positive. We also investigate whether systematic differences in the return to measures of human capital investments can explain the observed positive relationship between drug use and wages. The results from this analysis do not support such a hypothesis.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3535.

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Date of creation: Dec 1990
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Handle: RePEc:nbr:nberwo:3535

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References listed on IDEAS
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  1. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr. [Downloadable!] (restricted)
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  8. Gyourko, Joseph & Tracy, Joseph, 1988. "An Analysis of Public- and Private-Sector Wages Allowing for Endogenous Choices of Both Government and Union Status," Journal of Labor Economics, University of Chicago Press, vol. 6(2), pages 229-53, April. [Downloadable!] (restricted)
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  9. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July. [Downloadable!] (restricted)
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  10. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October. [Downloadable!] (restricted)
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  11. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
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  12. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ziggy MacDonald & Stephen Pudney, . "Illicit Drug Use and labour Market Achievement: Evidence from the UK," Discussion Papers in Public Sector Economics 98/2, Department of Economics, University of Leicester. [Downloadable!]
    Other versions:
  2. Robert Kaestner, 1998. "Does Drug Use Cause Poverty?," NBER Working Papers 6406, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Robert Kaestner, 1999. "Does Drug Use Cause Poverty?," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, pages 327-368 National Bureau of Economic Research, Inc. [Downloadable!]
  3. Robert Kaestner, 1995. "The Effects of Cocaine and Marijuana Use on Marriage and Marital Stability," NBER Working Papers 5038, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. R. R. Bryant & A. Jayawardhana & V. A. Samaranayake & A. Wilhite, . "The impact of alcohol and drug use on employment: A labor market study using the National Longitudinal Survey of Youth," Institute for Research on Poverty Discussion Papers 1092-96, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
  5. Ziggy MacDonald & Michael Shields, . "The Impact of Alcohol Use on Occupational Attainment and Wages," Discussion Papers in Public Sector Economics 98/8, Department of Economics, University of Leicester. [Downloadable!]
  6. Robert Kaestner, 1996. "Drug Use and AFDC Participation: Is There a Connection?," NBER Working Papers 5555, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Susan L. Ettner & Richard G. Frank & Ronald C. Kessler, 1997. "The Impact of Psychiatric Disorders on Labor Market Outcomes," NBER Working Papers 5989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Jeffrey DeSimone, 1999. "Illegal Drug Use and Labor Supply," Working Papers 9906, East Carolina University, Department of Economics. [Downloadable!]
  9. Charles A. Register, Donald R. Williams, Paul W. Grimes, 2001. "Adolescent Drug Use and Educational Attainment," Education Economics, Taylor and Francis Journals, vol. 9(1), pages 1-18, April. [Downloadable!] (restricted)
  10. Charles L. Baum & William F. Ford, 2004. "The wage effects of obesity: a longitudinal study," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 885-899. [Downloadable!]
  11. Molinari, Francesca, 2005. "Missing Treatments," Working Papers 05-11, Cornell University, Center for Analytic Economics. [Downloadable!]
  12. Suryadipta Roy, 2007. "Are Illegal Drugs Inferior Goods in the US?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(3), pages 303-314, September. [Downloadable!] (restricted)
  13. Jenny Williams & Christopher Skeels, 2006. "The Impact of Cannabis Use on Health," De Economist, Springer, vol. 154(4), pages 517-546, December. [Downloadable!] (restricted)
  14. Pinka Chatterji, 2006. "Illicit drug use and educational attainment," Health Economics, John Wiley & Sons, Ltd., vol. 15(5), pages 489-511. [Downloadable!]
    Other versions:
  15. M. Christopher Auld, 1998. "Wages, Alcohol Use, and Smoking: Simultaneous Estimates," HEW 9808001, EconWPA. [Downloadable!]
  16. Tekin, Erdal, 2002. "Employment, Wages, and Alcohol Consumption in Russia: Evidence from Panel Data," IZA Discussion Papers 432, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Ziggy MacDonald & Stephen Pudney, . "Analysing Drug Abuse with British Crime Survey Data: Modelling and Questionnaire Design Issues," Discussion Papers in Public Sector Economics 98/11, Department of Economics, University of Leicester. [Downloadable!]
    Other versions:
  18. Ours, Jan C. van, 2005. "Cannabis, cocaine and wages of prime age males," Discussion Paper 14, Tilburg University, Center for Economic Research. [Downloadable!]
  19. Phillip B. Levine & Tara A. Gustafson & Ann D. Velenchik, 1995. "More Bad News for Smokers? The Effects of Cigarette Smoking on Labor Market Outcomes," NBER Working Papers 5270, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Heineck, Guido & Schwarze, Johannes, 2003. "Substance Use and Earnings: The Case of Smokers in Germany," IZA Discussion Papers 743, Institute for the Study of Labor (IZA). [Downloadable!]
  21. MacDonald, Ziggy & Shields, Michael A., 2000. "The Impact of Alcohol Consumption on Occupational Attainment in England," IZA Discussion Papers 166, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  22. Ziggy MacDonald & Stephen Pudney, . "The Wages of Sin? Illegal Drug Use and the Labour Market," Discussion Papers in Public Sector Economics 99/6, Department of Economics, University of Leicester. [Downloadable!]
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