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Alcohol consumption, smoking and wages



The good health of an individual is a combination of uncontrollable factors that includes genetics and random events and controllable factors through the regulation of activities such as smoking and drinking. Since the work of Grossman in the 1970s, a significant relationship between health and earnings has been predicted. In this present paper the 1995 Australian National Health Survey is used to examine simultaneously the effects of drinking and smoking on wages. To model the interaction of smoking with alcohol consumption separate models are fitted for smokers and nonsmokers. These models account for potential selectivity bias resulting from the decision to smoke, and endogeneity arising from a potential causal relationship between earnings and alcohol consumption.

Suggested Citation

  • Jenny Lye & Joe Hirschberg, 2004. "Alcohol consumption, smoking and wages," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1807-1817.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:16:p:1807-1817
    DOI: 10.1080/00036840410001710645

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    References listed on IDEAS

    1. John Strauss & Duncan Thomas, 1998. "Health, Nutrition, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 766-817, June.
    2. repec:aph:ajpbhl:1987:77:4:425-431_4 is not listed on IDEAS
    3. Mullahy, John & Sindelar, Jody, 1996. "Employment, unemployment, and problem drinking," Journal of Health Economics, Elsevier, vol. 15(4), pages 409-434, August.
    4. Bush, Robert & Wooden, Mark, 1995. "Smoking and absence from work: Australian evidence," Social Science & Medicine, Elsevier, vol. 41(3), pages 437-446, August.
    5. French, Michael T. & Zarkin, Gary A., 1995. "Is moderate alcohol use related to wages? Evidence from four worksites," Journal of Health Economics, Elsevier, vol. 14(3), pages 319-344, August.
    6. repec:aph:ajpbhl:1993:83:6:888-890_6 is not listed on IDEAS
    7. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    8. Mullahy, John & Sindelar, Jody L, 1993. "Alcoholism, Work, and Income," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 494-520, July.
    9. 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.
    10. Lee, Lung-fei & Maddala, G S & Trost, R P, 1980. "Asymptotic Covariance Matrices of Two-Stage Probit and Two-Stage Tobit Methods for Simultaneous Equations Models with Selectivity," Econometrica, Econometric Society, vol. 48(2), pages 491-503, March.
    11. Vivian Hamilton & Barton H. Hamilton, 1997. "Alcohol and Earnings: Does Drinking Yield a Wage Premium," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 135-151, February.
    12. Barrett, Garry F, 2002. "The Effect of Alcohol Consumption on Earnings," The Economic Record, The Economic Society of Australia, vol. 78(240), pages 79-96, March.
    13. Zarkin, Gary A. & French, Michael T. & Mroz, Thomas & Bray, Jeremy W., 1998. "Alcohol use and wages: New results from the national household survey on drug abuse," Journal of Health Economics, Elsevier, vol. 17(1), pages 53-68, January.
    14. repec:aph:ajpbhl:1992:82:1:29-32_4 is not listed on IDEAS
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    Cited by:

    1. Shao-Hsun Keng & Sheng-Jang Sheu, 2013. "The effect of stimulants and their combined use with cigarettes on mortality: the case of betel quid," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(4), pages 677-695, August.
    2. John Freebairn, 2010. "Special Taxation of Alcoholic Beverages to Correct Market Failures," Economic Papers, The Economic Society of Australia, vol. 29(2), pages 200-214, June.
    3. van Ours, J.C., 2002. "A Pint a Day Raises a Man's Pay; But Smoking Blows that Gain Away," Discussion Paper 2002-20, Tilburg University, Center for Economic Research.
    4. Pierre Pestieau & Gregory Ponthiere, 2012. "Myopia, regrets, and risky behaviors," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(2), pages 288-317, April.
    5. 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.
    6. 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", vol. 6(2), pages 60-80.
    7. 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).
    8. Joseph G. Hirschberg & Jenny N. Lye, 2004. "Inferences for the Extremum of Quadratic Regression Models," Department of Economics - Working Papers Series 906, The University of Melbourne.
    9. Lixin Cai, 2009. "Effects of Health on Wages of Australian Men," The Economic Record, The Economic Society of Australia, vol. 85(270), pages 290-306, September.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I19 - Health, Education, and Welfare - - Health - - - Other


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