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Substance Use and Earnings: The Case of Smokers in Germany

Author

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  • 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.

Suggested Citation

  • 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).
  • Handle: RePEc:iza:izadps:dp743
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    References listed on IDEAS

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    1. 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.
    2. 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.
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    6. van Ours, Jan C, 2002. "A Pint a Day Raises a Man's Pay; But Smoking Blows that Gain Away," CEPR Discussion Papers 3308, C.E.P.R. Discussion Papers.
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    8. 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.
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    10. 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.
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    13. Kaestner, Robert, 1991. "The Effect of Illicit Drug Use on the Wages of Young Adults," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 381-412, October.
    14. MacDonald, Ziggy & Shields, Michael A, 2001. "The Impact of Alcohol Consumption on Occupational Attainment in England," Economica, London School of Economics and Political Science, vol. 68(271), pages 427-453, August.
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    Citations

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    Cited by:

    1. Anger, Silke & Kvasnicka, Michael, 2010. "Does Smoking Really Harm Your Earnings so Much? Biases in Current Estimates of the Smoking Wage Penalty," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 561-564.
    2. 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.
    3. 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.
    4. Eric A. BONDZIE, 2016. "Effect of Smoking and other Economic Variables on Wages in the Euro Area," Journal of Economics Bibliography, KSP Journals, vol. 3(1), pages 38-52, March.
    5. Palali, Ali, 2015. "Early Smoking, Education, and Labor Market Performance," Discussion Paper 2015-033, Tilburg University, Center for Economic Research.
    6. 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.
    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. repec:kap:decono:v:165:y:2017:i:3:d:10.1007_s10645-017-9290-y is not listed on IDEAS
    9. Ermakov, Stepan, 2012. "The impact of smoking intensity on wages in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 25(1), pages 70-94.
    10. 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.
    11. Andrew Sharpe & Alexander Murray, 2011. "State of the Evidence on Health as a Determinant of Productivity," CSLS Research Reports 2011-04, Centre for the Study of Living Standards.

    More about this item

    Keywords

    smoking; earnings regressions;

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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