EXPLORATION OF THE RELATIONSHIP BETWEEN SUBSTANCE AND EMPLOYMENT: A STRUCTURAL APPROACH

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While alcohol and tobacco used independently may have different effects on labor market outcomes of users, it is not clear how the combined use of both affects labor market outcomes of users. This research project uses economic theory and data from National Longitudinal Survey of Youth 97 (NLSY-97) to investigate the relationships among alcohol and tobacco use on the one hand and employment on the other. The researcher argues that while moderate alcohol use may have a positive labor market effect through increase social interaction, heavy alcohol use may have large negative effects. Moreover, the interaction of alcohol and tobacco use may have effects that may be either positive or negative depending on the individual. The researcher tests this theory using data from the NLSY-79. Apart from providing a better understanding of the effects of substance use on employment and other labor market outcomes, it also provides a measurement of the unintended consequences of substance use policies. The results of the research project will provide inputs into crafting and implementing better substance use policies, thus improving the wellbeing of US citizens. This proposed research project will use structural modelling and data from NLSY-97 to investigate the effects of substance use on labor market outcomes. The project develops and applies a methodology to separately explain the extent to which moderate versus heavy alcohol and tobacco use affect employment, accounting for part-time and full-time employment. The model suggests that moderate use of alcohol may have beneficial labor market effects. Accounting for heterogeneity and non-linearities in the effects of substance use on labor market outcomes is an innovation to the literature that has so far assumed a linear relationship. The model will be estimated with data from NLSY-97. Given that alcohol and tobacco regulation policies focus on decrease use, it is possible that these policies may be suboptimal. The research will also conduct policy counterfactuals use polices that may create social capital through moderate substance use. The proposed research agenda also include a large dose of undergraduate and graduate education, including developing a workshop series in the Economics of Risky Behaviors. The results of the research project will provide inputs into crafting and implementing better substance use policies, thus improving the wellbeing of US citizens.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.