Essays on the economics of drug testing programs

This dissertation studies economic issues posed by illicit drug testing. The firm's decision to adopt a drug testing program is analyzed in the context of a matching model. Essay one studies the labor market effects of preemployment drug testing. While drug testing enhances productive efficiency, many of these welfare gains are dissipated by a labor market externality. Drug testing also benefits drug-free workers at the expense of drug users. Low turnover rates, high injury rates, the use of job training, and large workforces all increase the likelihood that the firm adopts a preemployment drug testing program. Essay two considers the use of "for cause" drug testing in conjunction with preemployment testing. Large firms and firms with high injury rates test with greater intensity than others. As the firm becomes larger, it is relatively more likely to adopt a preemployment testing program than a "for cause" policy. Essay three studies the pattern of adoption of preemployment drug testing over time. The early adoption of drug testing programs is positively related to factors influencing their profitability.