Abstract
McGuire and Ruhm (1993) develop an interesting and policy-relevant model of workplace drug abuse policy. They examine workers’ choice to undergo treatment (rehabilitation) for substance abuse and firms’ choice of drug-testing policies, concluding that ‘labor market incentives will generally lead to too little treatment and too much testing’. Drug addicts are assumed to have a ‘high’ probability ( p> of causing a costly workplace accident while non-addicts are assumed to have a ‘low’ probability (a < p) of causing an accident. Another key assumption is that treatment is perfect. That is, any ‘addict’ undergoing treatment changes from a ‘high’ to a ‘low’ risk with probability one. Although the authors acknowledge that actual treatment regimes are imperfect and discuss how imperfect treatment can be incorporated, they do not appear to recognize the ways in which their qualitative results depend on their simplifying assumption. Allowing partially effective treatment by assuming that the accident risk of treated drug users falls to (Y with some
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