Road to perdition? The effect of illicit drug use on labour market outcomes of prime-age men in Mexico

TL;DR

This paper investigates how illicit drug use negatively affects employment, occupational status, and formality among prime-age men in Mexico, highlighting larger impacts than in high-income countries.

Contribution

It applies Lewbel's IV method to address endogeneity in drug use and provides new evidence on its labor market effects in a middle-income country.

Findings

Drug use reduces employment and occupational attainment.

Drug use increases unemployment among Mexican men.

Effects of drug use are larger than in high-income economies.

Abstract

This study addresses the impact of illicit drug use on the labour market outcomes of men in Mexico. We leverage statistical information from three waves of a comparable national survey and make use of Lewbel's heteroskedasticity-based instrumental variable strategy to deal with the endogeneity of drug consumption. Our results suggests that drug consumption has quite negative effects in the Mexican context: It reduces employment, occupational attainment and formality and raises unemployment of local men. These effects seem larger than those estimated for high-income economies