New Estimates of the Effect of Marijuana and Cocaine Use on Wages

Abstract

Using the 1984 and 1988 waves of the National Longitudinal Survey of Youth, this study provides an update of several previous cross-sectional estimates of the effect of illicit drug use on wages, as well as the first longitudinal estimates of that effect. The cross-sectional results, which are generally consistent with the surprising findings of previous research, suggest that illicit drug use has a large, positive effect on wages. The longitudinal estimates, which control for unobserved heterogeneity in the sample, are mixed: among men, the estimated wage effects of both marijuana and cocaine use are negative, but among women, the effect of cocaine use remains positive and large. Because the longitudinal model is imprecisely estimated, however, those results are inconclusive.