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The smoker's wage penalty puzzle: evidence from Britain

  • Brune, Lasse F.
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    This work investigates the effect of smoking on wages for male workers using panel data from Britain for the period of 1991-2005. The strong negative correlation of smoking and wages found in a crosssectional analysis reduces substantially when accounting for unobserved individual heterogeneity using Fixed Effects estimation. I find a statistically significant wage penalty that is causally due to smoking of about -2% for smokers over those who quit. Further analysis indicates, however, that the negative effect might be underestimated when comparing with those who never started smoking or quit a long time ago.

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    File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2007-31.pdf
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    Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2007-31.

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    Date of creation: 21 Dec 2007
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    Publication status: published
    Handle: RePEc:ese:iserwp:2007-31
    Contact details of provider: Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
    Phone: 44-1206-872957
    Fax: 44-1206-873151
    Web page: https://www.iser.essex.ac.uk/
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    Order Information: Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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    1. Leigh, J. Paul, 1995. "Smoking, self-selection and absenteeism," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 365-386.
    2. Loureiro, Maria L. & Sanz-de-Galdeano, Anna & Vuri, Daniela, 2006. "Smoking Habits: Like Father, Like Son, Like Mother, Like Daughter," IZA Discussion Papers 2279, Institute for the Study of Labor (IZA).
    3. Frank J. Chaloupka & Kenneth E. Warner, 1999. "The Economics of Smoking," NBER Working Papers 7047, National Bureau of Economic Research, Inc.
    4. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003 05, Stata Users Group.
    5. 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.
    6. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    7. repec:ese:iserwp:2008-03 is not listed on IDEAS
    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.
    9. Victor R. Fuchs, 1980. "Time Preference and Health: An Exploratory Study," NBER Working Papers 0539, National Bureau of Economic Research, Inc.
    10. 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).
    11. Lalith Munasinghe & Nachum Sicherman, 2005. "Wage Dynamics and Unobserved Heterogeneity: Time Preference of Learning Ability?," NBER Working Papers 11031, National Bureau of Economic Research, Inc.
    12. 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.
    13. M. Christopher Auld, 2005. "Smoking, Drinking, and Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    14. Lokshin, Michael & Beegle, Kathleen, 2006. "Forgone earnings from smoking : evidence for a developing country," Policy Research Working Paper Series 4018, The World Bank.
    15. Charles L. Baum & William F. Ford & Jeffrey D. Hopper, 2006. "The Obese Smoker's Wage Penalty," Social Science Quarterly, Southwestern Social Science Association, vol. 87(4), pages 863-881.
    16. van Ours, J.C., 2004. "A pint a day raises a man's pay, but smoking blows that gain away," Other publications TiSEM 1447748f-5e9e-4064-84f2-1, Tilburg University, School of Economics and Management.
    17. Almudena Sevilla-Sanz & Mark L. Bryan, 2007. "Does Housework Lower Wages and Why? Evidence for Britain," Economics Series Working Papers 331, University of Oxford, Department of Economics.
    18. 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.
    19. 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 223-55, March-Apr.
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