The Economics of Preemployment Drug Testing

Abstract

A labor market matching model shows that pre-employment drug testing leads to a net improvement in social welfare, but the overall level of drug testing will exceed the social optimum. These results hold for wide ranges of parameter values. Drug testing results in fewer and shorter episodes of unemployment for drug-free workers while producing the opposite effect for drug users. Increases in the overall prevalence of drug use can lower the popularity of drug testing. (JOO, 021)