The smoking wage penality in the United Kingdom: Regression and matching evidence from the British Household Survey Panel

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The smoking wage penality in the United Kingdom: Regression and matching evidence from the British Household Survey Panel

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Nils Braakmann () (Institute of Economics, Leuphana University of Lüneburg)

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Nils Braakmann

Abstract

This paper considers the impact of tobacco consumption on wages in the UK using data from fifteen waves of the British Household Panel Survey. Considering both overall smoker status as well as the number of cigarettes consumed, we provide estimates for the smoking wage penalty using standard regression methods, including panel estimators for fixed eects and panel instrumental variable estimators. Furthermore, we analyse the impact of stopping and starting to smoke relative to permanent smokers and non-smokers by Mahalanobis-matching. In the cross-section, we find a rather large wage penalty for smokers of about 4%. However, panel estimator and IV results show relatively few support for hypotheses linking the smoking wage penalty to either lower productivity of smokers, be it health related or not, or discrimination. Matching results suggest that starting or stopping to smoke does not aect later earnings relative to remaining either smoker or non-smoker.

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Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 96.

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Length: 33 pages
Date of creation: Aug 2008
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Handle: RePEc:lue:wpaper:96

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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Silke Anger & Michael Kvasnicka, 2006. "Biases in Estimates of the Smoking Wage Penalty," Discussion Papers of DIW Berlin 654, DIW Berlin, German Institute for Economic Research. [Downloadable!]
Other versions:
- 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!]
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). [Downloadable!]
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)
Other versions:
- Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 61, Chicago - Center for Study of Economy and State.
- Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
M. Christopher Auld, 2005. "Smoking, Drinking, and Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(2). [Downloadable!] (restricted)
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)
Other versions:
- 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.

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