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Biases in Estimates of the Smoking Wage Penalty

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Author Info

  • Silke Anger
  • Michael Kvasnicka

Abstract

Empirical studies on the earnings effects of tobacco use have found significant wage penalties attached to smoking. We produce evidence that suggests that these estimates are significantly upward biased. The bias arises from a general failure in the literature to control for the past smoking behavior of individuals. 2SLS earnings estimates show that the smoking wage penalty is reduced by as much as a third, if past smoking of individuals is controlled for. Our results also point to significant wage gains for individuals that quit smoking, a finding that is of substantial interest, given the lack of evidence on the earnings effects of smoking cessation.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.55665.de/dp654.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 654.

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Length: 11 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp654

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Keywords: Smoking; wages; earnings regressions;

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References

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  1. Heineck, Guido & Schwarze, Johannes, 2003. "Substance Use and Earnings: The Case of Smokers in Germany," IZA Discussion Papers 743, Institute for the Study of Labor (IZA).
  2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," Boston College Working Papers in Economics, Boston College Department of Economics 545, Boston College Department of Economics, revised 14 Feb 2003.
  3. van Ours, Jan C., 2004. "A pint a day raises a man's pay; but smoking blows that gain away," Journal of Health Economics, Elsevier, Elsevier, vol. 23(5), pages 863-886, September.
  4. M. Christopher Auld, 2005. "Smoking, Drinking, and Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
  5. Phillip B. Levine & Tara Gustafson & Ann D. Velenchik, 1997. "More bad news for smokers? The effects of cigarette smoking on wages," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(3), pages 493-509, April.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Quit smoking!
    by chris dillow in Stumbling and Mumbling on 2007-01-15 15:33:21
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Cited by:
  1. Andrew Sharpe & Alexander Murray, 2011. "State of the Evidence on Health as a Determinant of Productivity," CSLS Research Reports, Centre for the Study of Living Standards 2011-04, Centre for the Study of Living Standards.
  2. Ermakov, Stepan, 2012. "The impact of smoking intensity on wages in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 25(1), pages 70-94.
  3. repec:ese:iserwp:2007-31 is not listed on IDEAS
  4. Nils Braakmann, 2008. "The smoking wage penality in the United Kingdom: Regression and matching evidence from the British Household Survey Panel," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 96, University of Lüneburg, Institute of Economics.

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