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 (1972) a significant relationship between health and earnings is predicted. In this paper, the 1995 Australian National Health Survey is used to simultaneously examine the effects of drinking and smoking on wages. To model the interaction of smoking with alcohol consumption separate models are fit for smokers and nonsmokers. These models account for potential selectivity bias resulting from the decision to smoke and endogeneity arising from a potential casual relationship between earnings and alcohol consumption.
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