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Substance Use and Earnings: The Case of Smokers in Germany

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Author Info
Heineck, Guido () (University of Bamberg)
Schwarze, Johannes (University of Bamberg, DIW Berlin and IZA Bonn)

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Abstract

This paper examines the effect of smoking behavior on earnings. Using data from the GSOEP, both cross-sectional and longitudinal models are estimated separately for males and females. Results for the cross-sectional models confirm prior analyses inasmuch as smoking has a negative effect on earnings for males. However, applying fixed-effects estimation, this effect is found to be inverted for men aged 25 to 35 years compared to their non-smoking counterparts. That is, controlling for unobservable individual heterogeneity, the result implies that male smokers are individuals with higher time preference rates. At the early stage of the age-earnings course higher earnings are therefore found for smokers because young male non-smokers only are about to start off their occupational career. Women’s earnings, however, are not affected by smoking behavior.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 743.

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Length: 30 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:iza:izadps:dp743

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Related research
Keywords: smoking; earnings regressions;

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Find related papers by JEL classification:
I12 - Health, Education, and Welfare - - Health - - - Health Production
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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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. Kaestner, Robert, 1991. "The Effect of Illicit Drug Use on the Wages of Young Adults," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 381-412, October. [Downloadable!] (restricted)
    Other versions:
  2. Berger, Mark C & Leigh, J Paul, 1988. "The Effect of Alcohol Use on Wages," Applied Economics, Taylor and Francis Journals, vol. 20(10), pages 1343-51, October.
  3. MacDonald, Ziggy & Shields, Michael A, 2001. "The Impact of Alcohol Consumption on Occupational Attainment in England," Economica, London School of Economics and Political Science, vol. 68(271), pages 427-53, August. [Downloadable!] (restricted)
    Other versions:
  4. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-42, August. [Downloadable!] (restricted)
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  5. Jonathan Gruber, 2000. "Risky Behavior Among Youths: An Economic Analysis," NBER Working Papers 7781, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Robert Kaestner, 1992. "The Effect of Illicit Drug Use on the Labor Supply of Young Adults," NBER Working Papers 4187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. 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, ILR School, Cornell University, vol. 50(3), pages 493-509, April.
  8. 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)
  9. Christian Bantle & John P. Haisken-DeNew, 2002. "Smoke Signals: The Intergenerational Transmission of Smoking Behavior," Discussion Papers of DIW Berlin 277, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  10. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1994. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Leigh, J. Paul, 1995. "Smoking, self-selection and absenteeism," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 365-386. [Downloadable!] (restricted)
  12. Laux, Fritz L., 2000. "Addiction as a market failure: using rational addiction results to justify tobacco regulation," Journal of Health Economics, Elsevier, vol. 19(4), pages 421-437, July. [Downloadable!] (restricted)
  13. Jenny N. Lye & Joe Hirschberg, 2004. "Alcohol consumption, smoking and wages," Applied Economics, Taylor and Francis Journals, vol. 36(16), pages 1807-1817, September. [Downloadable!] (restricted)
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  14. Robert Kaestner, 1994. "New estimates of the effect of marijuana and cocaine use on wages," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(3), pages 454-470, April.
  15. Tekin, Erdal, 2002. "Employment, Wages, and Alcohol Consumption in Russia: Evidence from Panel Data," IZA Discussion Papers 432, Institute for the Study of Labor (IZA). [Downloadable!]
  16. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August. [Downloadable!] (restricted)
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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. repec:ese:iserwp: is not listed on IDEAS
  2. Silke Anger & Michael Kvasnicka, 2006. "Biases in Estimates of the Smoking Wage Penalty," SFB 649 Discussion Papers SFB649DP2006-089, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
    Other versions:
  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. [Downloadable!]
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