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The effect of drinking and smoking on the labour market outcomes of low-income young adults

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  • Todd C. Neumann

Abstract

Among adults the causal ‘drinking bonus’ and ‘smoking penalty’ have been estimated to be as large as 12% and 24%, respectively. The magnitudes of these effects compare in size with many active labour market programs targeted at low-income young adults. This article extends the literature by examining these relationships in such a group. Somewhat surprisingly the data indicate that just as in the greater population young drinkers have more favourable labour market outcomes than nondrinkers. However, when a fixed-effects approach is used to identify causal impacts there is no evidence that drinking has a positive impact on labour market outcomes and some evidence for negative returns to drinking. The smoking penalty is estimated to be much smaller among this group and not statistically significant. Finally, estimates suggest that the observed correlations between consumption and labour market outcomes are biased by unobserved characteristics of the individual as well as unobservables that change over time that are likely causing the treatment decision.

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  • Todd C. Neumann, 2013. "The effect of drinking and smoking on the labour market outcomes of low-income young adults," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 541-553, February.
    • Handle: RePEc:taf:applec:45:y:2013:i:5:p:541-553
    DOI: 10.1080/00036846.2011.579063
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    1. Phillip B. Levine & Tara A. Gustafson & Ann D. Velenchik, 1997. "More Bad News for Smokers? The Effects of Cigarette Smoking on Wages," ILR Review, Cornell University, ILR School, vol. 50(3), pages 493-509, April.
    2. Pinka Chatterji & Jeffrey DeSimone, 2006. "High School Alcohol Use and Young Adult Labor Market Outcomes," NBER Working Papers 12529, National Bureau of Economic Research, Inc.
    3. L. Bettendorf & E. Dijkgraaf, 2011. "The bicausal relation between religion and income," Applied Economics, Taylor & Francis Journals, vol. 43(11), pages 1351-1363.
    4. Phillip B. Levine & Tara A. Gustafson & Ann D. Velenchik, 1995. "More Bad News for Smokers? The Effects of Cigarette Smoking on Labor Market Outcomes," NBER Working Papers 5270, National Bureau of Economic Research, Inc.
    5. Philip J. Cook & Bethany Peters, 2005. "The Myth of the Drinker's Bonus," NBER Working Papers 11902, National Bureau of Economic Research, Inc.
    6. James Fogarty, 2004. "The Own-Price Elasticity of Alcohol: A Meta-Analysis," Economics Discussion / Working Papers 04-01, The University of Western Australia, Department of Economics.
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    Cited by:

    1. Steven F. Koch & Evelyn Thsehla, 2022. "The impact of diabetes on labour market outcomes," Development Southern Africa, Taylor & Francis Journals, vol. 39(3), pages 424-456, May.
    2. Lång, Elisabeth & Nystedt, Paul, 2018. "Blowing up money? The earnings penalty of smoking in the 1970s and the 21st century," Journal of Health Economics, Elsevier, vol. 60(C), pages 39-52.

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