In this paper, I outline the economic theory pertinent to the analysis of the effect of drug use on labor market outcomes. I argue that the complex behavioral links that underlie the relationship between drug use and labor market outcomes make it necessary to explicitly model the process that determines both of these outcomes. Only then can effective empirical strategies be developed that will yield credible estimates of the causal effect of drug use on labor market outcomes. Economic theory is well suited to this task since at its core it is a behavioral model of individual choice. I also discuss some methodological strategies that can be used to address the empirical problems associated with estimating such a structural model.
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