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Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics

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  • Lalith Munasinghe

    (Columbia University)

  • Nachum Sicherman

    (Columbia University)

Abstract

Time preference is a key determinant of investments in human capital and occupational choice. Individuals with higher discount rates are less likely to invest in human capital and hence more likely to select into careers with lower and flatter earnings profiles. Since discount rates are unobservable, we use smoking behavior as a proxy to study the effect of discounting on wage dynamics. We find that smokers, compared to non-smokers, earn lower wages at the time they enter the labor market and experience substantially lower rates of wage growth. These differences are consistent with the discounting hypothesis, and highly robust to an extensive array of control variables.

Suggested Citation

  • Lalith Munasinghe & Nachum Sicherman, 2006. "Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 595-616, Fall.
    • Handle: RePEc:eej:eeconj:v:32:y:2006:i:4:p:595-616
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Eiji Yamamura, 2016. "Smokers’ Preference for Divorce and Extramarital Sex," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 59(2), pages 44-76.
    2. Eiji Yamamura, 2014. "Smokers’ Sexual Behavior and Their Satisfaction with Family Life," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(3), pages 1229-1247, September.
    3. Thomas Dohmen & Armin Falk, 2010. "You Get What You Pay For: Incentives and Selection in the Education System," Economic Journal, Royal Economic Society, vol. 120(546), pages 256-271, August.
    4. Hurwitz, Abigail & Sade, Orly, 2020. "An investigation of time preferences, life expectancy, and annuity versus lump sum choices: Can smoking harm long-term saving decisions?," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 812-825.
    5. Williams, Jenny & van Ours, Jan C., 2017. "Early Cannabis Use and School to Work Transition of Young Men," IZA Discussion Papers 10488, Institute of Labor Economics (IZA).
    6. Fouarge, Didier & Kriechel, Ben & Dohmen, Thomas, 2014. "Occupational sorting of school graduates: The role of economic preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 335-351.
    7. Matteo Migheli & Flavia Coda Moscarola, 2017. "Gender Differences in Financial Education: Evidence from Primary School," De Economist, Springer, vol. 165(3), pages 321-347, September.
    8. Takahiro Miura, 2016. "The association between time preference and smoking behavior: A dynamic panel analysis," Discussion Papers in Economics and Business 16-16, Osaka University, Graduate School of Economics.
    9. Stephan Meier & Charles Sprenger, 2007. "Selection into financial literacy programs: evidence from a field study," Public Policy Discussion Paper 07-5, Federal Reserve Bank of Boston.
    10. Meier, Stephan & Sprenger, Charles D., 2013. "Discounting financial literacy: Time preferences and participation in financial education programs," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 159-174.
    11. Stephan Meier & Charles Sprenger, 2007. "Impatience and credit behavior: evidence from a field experiment," Working Papers 07-3, Federal Reserve Bank of Boston.
    12. Ajay Mahal & Lainie Sutton, 2014. "Economic prosperity and non-communicable disease: understanding the linkages," Chapters, in: Raghbendra Jha & Raghav Gaiha & Anil B. Deolalikar (ed.), Handbook on Food, chapter 12, pages 278-324, Edward Elgar Publishing.
    13. Yamamura, Eiji, 2014. "Time preference and perceptions about government spending and tax: Smokers’ dependence on government support," MPRA Paper 55659, University Library of Munich, Germany.
    14. Munasinghe, Lalith & Sicherman, Nachum, 2004. "Wage Dynamics and Unobserved Heterogeneity: Time Preference or Learning Ability?," IZA Discussion Papers 1436, Institute of Labor Economics (IZA).

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