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

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Author Info
Lalith Munasinghe () (Columbia University)
Nachum Sicherman (Columbia University)

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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.

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File URL: http://college.holycross.edu/eej/Volume32/V32N4P595_616.pdf
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Publisher Info
Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 32 (2006)
Issue (Month): 4 (Fall)
Pages: 595-616
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eej:eeconj:v:32:y:2006:i:4:p:595-616

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Munasinghe, Lalith, 2000. "Wage Growth and the Theory of Turnover," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 204-20, April. [Downloadable!] (restricted)
  2. Haley, William J, 1973. "Human Capital: The Choice Between Investment and Income," American Economic Review, American Economic Association, vol. 63(5), pages 929-44, December. [Downloadable!] (restricted)
  3. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Jonathan Gruber & Jonathan Zinman, 2000. "Youth Smoking in the U.S.: Evidence and Implications," NBER Working Papers 7780, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Kenkel, D.S., 1988. "Health Behavior, Health Knowledge, And Schooling," Papers 10-88-3, Pennsylvania State - Department of Economics.
    Other versions:
  6. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 626-53, October. [Downloadable!] (restricted)
  7. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  8. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring. [Downloadable!] (restricted)
  9. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November. [Downloadable!] (restricted)
  10. William N. Evans & Edward Montgomery, 1994. "Education and Health: Where There's Smoke There's an Instrument," NBER Working Papers 4949, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  12. W. Kip Viscusi & Joni Hersch, 2001. "Cigarette Smokers As Job Risk Takers," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 269-280, May. [Downloadable!] (restricted)
  13. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephan Meier & Charles Sprenger, 2007. "Impatience and credit behavior: evidence from a field experiment," Working Papers 07-3, Federal Reserve Bank of Boston. [Downloadable!]
  2. Lalith Munasinghe & Nachum Sicherman, 2005. "Wage Dynamics and Unobserved Heterogeneity: Time Preference of Learning Ability?," NBER Working Papers 11031, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!]
  4. Meier, Stephan & Sprenger, Charles, 2008. "Discounting Financial Literacy: Time Preferences and Participation in Financial Education Programs," IZA Discussion Papers 3507, Institute for the Study of Labor (IZA). [Downloadable!]
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This page was last updated on 2009-11-18.

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