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Education and Health: Where There's Smoke There's an Instrument

  • William N. Evans
  • Edward Montgomery

Victor Fuchs has suggested that the persistent positive correlation between education and health habits can be explained by interpersonal differences in the discount rate. If Fuchs is correct, some health habits can be used as instruments for education in standard wage equations. We use whether an individual smoked at age 18 in such a fashion. The instrument is strongly correlated with years of education, and IV estimates of the return to schooling are 10 percent larger than the OLS estimates. We fail to reject tests of overidentifying restrictions, show how the smoking/education link varies systematically across age cohorts and income groups, and demonstrate that the instrument is correlated with other intertemporal decisions such as home ownership. The results are replicated in four additional data sets, and for both males and females.

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File URL: http://www.nber.org/papers/w4949.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4949.

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Date of creation: Dec 1994
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Handle: RePEc:nbr:nberwo:4949
Note: HE LS
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  17. Butcher, Kristin F & Case, Anne, 1994. "The Effect of Sibling Sex Composition on Women's Education and Earnings," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 531-63, August.
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  25. Hamilton, James L, 1972. "The Demand for Cigarettes: Advertising, the Health Scare, and the Cigarette Advertising Ban," The Review of Economics and Statistics, MIT Press, vol. 54(4), pages 401-11, November.
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