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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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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-089.

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Length: 15 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2006-089

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Keywords: Smoking; Wages; Earnings Regressions;

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References

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  1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," Boston College Working Papers in Economics 545, Boston College Department of Economics, revised 14 Feb 2003.
  2. 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, vol. 23(5), pages 863-886, September.
  3. 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).
  4. M. Christopher Auld, 2005. "Smoking, Drinking, and Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
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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. repec:ese:iserwp:2007-31 is not listed on IDEAS
  2. Andrew Sharpe & Alexander Murray, 2011. "State of the Evidence on Health as a Determinant of Productivity," CSLS Research Reports 2011-04, Centre for the Study of Living Standards.
  3. 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 96, University of Lüneburg, Institute of Economics.
  4. Ermakov, Stepan, 2012. "The impact of smoking intensity on wages in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 25(1), pages 70-94.

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