Cannabis Use, Employment, and Income: Fixed-Effects Analysis of Panel Data

Uncertainty exists regarding the direction and magnitude of the association between cannabis use and labor market outcomes. Using panel data from waves 1 and 2 of the National Epidemiological Survey of Alcohol and Related Conditions, the current paper estimates the associations between several patterns of cannabis use during the past year, current employment, and annual personal income. In the single-equation models (wave 2 data), nearly all patterns of cannabis use are significantly associated with worse labor market outcomes (p < 0.05). However, when using fixed-effects techniques to address unobserved and time-invariant individual heterogeneity, the estimates are generally smaller in magnitude and less likely to be statistically significant vis-A -vis the benchmark estimates. These findings suggest that unobserved individual heterogeneity is an important source of bias in models of cannabis use and labor market outcomes. Moreover, cannabis use may be less detrimental in the labor market than other studies have reported.