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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)

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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Bibliographic 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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Keywords: smoking; earnings regressions;

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References

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  1. M. Christopher Auld, 2005. "Smoking, Drinking, and Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
  2. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  3. Andrew M. Gill & Robert J. Michaels, 1992. "Does drug use lower wages?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(3), pages 419-434, April.
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  5. Kaestner, Robert, 1991. "The Effect of Illicit Drug Use on the Wages of Young Adults," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(4), pages 381-412, October.
  6. Jonathan Gruber, 2000. "Risky Behavior Among Youths: An Economic Analysis," NBER Working Papers 7781, National Bureau of Economic Research, Inc.
  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, Cornell University, ILR School, vol. 50(3), pages 493-509, April.
  8. Robert Kaestner, 1994. "The Effect of Illicit Drug Use on the Labor Supply of Young Adults," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 126-155.
  9. Jenny Lye & Joe Hirschberg, 2004. "Alcohol consumption, smoking and wages," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1807-1817.
  10. MacDonald, Ziggy & Shields, Michael A., 2000. "The Impact of Alcohol Consumption on Occupational Attainment in England," IZA Discussion Papers 166, Institute for the Study of Labor (IZA).
  11. 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.
  12. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(4), pages 722-42, August.
  13. 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.
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  15. Leigh, J. Paul, 1995. "Smoking, self-selection and absenteeism," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 365-386.
  16. Robert Kaestner, 1994. "New estimates of the effect of marijuana and cocaine use on wages," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(3), pages 454-470, April.
  17. 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.
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Citations

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Cited by:
  1. Silke Anger & Michael Kvasnicka, 2010. "Does smoking really harm your earnings so much? Biases in current estimates of the smoking wage penalty," Applied Economics Letters, Taylor & Francis Journals, vol. 17(6), pages 561-564.
  2. Lokshin, Mikhail & Sajaia, Zurab, 2007. "The Economic Cost of Smoking: Differences in Wages between Smokers and Non-smokers in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 6(2), pages 60-80.
  3. 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.
  4. 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.
  5. Pierre Pestieau & Gregory Ponthiere, 2012. "Myopia, regrets, and risky behaviors," International Tax and Public Finance, Springer, vol. 19(2), pages 288-317, April.
  6. 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.
  7. Brune, Lasse F., 2007. "The smoker's wage penalty puzzle: evidence from Britain," ISER Working Paper Series 2007-31, Institute for Social and Economic Research.
  8. 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.

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