WORKPLACE DRUG-ABUSE POLICY

An estimated 70 percent of illicit drug users are in the workforce. Th is paper studies workplace policies relating to drug abuse treatment a nd testing in a labor market with asymmetric information about worker proclivities to abuse drugs and to incur costs of workplace accidents. Drug abuse has a moral hazard component related to worker choice of t reatment or other deterrent activities, and a selection component rela ted to drug testing. We characterize the type and frequency of workers treated and tested in labor market equilibrium. Labor market incentiv es will generally lead to too little treatment and too much testing.