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

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