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Wages, Alcohol Use, and Smoking: Simultaneous Estimates


  • M. Christopher Auld

    (University of Calgary)


This paper estimates a simultaneous model of moderate and problem drinking, smoking, and wages using a random sample of employed Canadian men. The results indicate that sample selection into alcohol and tobacco use is not negligible. With all else in the system held constant, moderate and heavy drinking are both associated with considerably higher wages than abstention from drinking, whereas smoking is associated with lower wages. Allowing for feedback from wages to substance use is important: if wages are excluded from the substance use equations, the premium to heavy drinking disappears, the premium for moderate drinking rises, and the penalty to smoking is diminished.

Suggested Citation

  • M. Christopher Auld, 1998. "Wages, Alcohol Use, and Smoking: Simultaneous Estimates," HEW 9808001, EconWPA.
  • Handle: RePEc:wpa:wuwphe:9808001
    Note: Type of Document - PostScript; prepared on Linux 2.0; to print on PostScript; pages: 40; figures: included

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    References listed on IDEAS

    1. Mullahy, John & Sindelar, Jody, 1996. "Employment, unemployment, and problem drinking," Journal of Health Economics, Elsevier, vol. 15(4), pages 409-434, August.
    2. Lee, Lung-Fei, 1992. "On Efficiency of Methods of Simulated Moments and Maximum Simulated Likelihood Estimation of Discrete Response Models," Econometric Theory, Cambridge University Press, vol. 8(04), pages 518-552, December.
    3. Frank J. Chaloupka & Adit Laixuthai, 1997. "Do Youths Substitute Alcohol and Marijuana? Some Econometric Evidence," Eastern Economic Journal, Eastern Economic Association, vol. 23(3), pages 253-276, Summer.
    4. Donald S. Kenkel & Ping Wang, 1999. "Are Alcoholics in Bad Jobs?," NBER Chapters,in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, pages 251-278 National Bureau of Economic Research, Inc.
    5. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-742, August.
    6. 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.
    7. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier.
    8. 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.
    9. 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.
    10. Manning, Willard G. & Blumberg, Linda & Moulton, Lawrence H., 1995. "The demand for alcohol: The differential response to price," Journal of Health Economics, Elsevier, vol. 14(2), pages 123-148, June.
    11. Hajivassiliou, Vassilis & McFadden, Daniel & Ruud, Paul, 1996. "Simulation of multivariate normal rectangle probabilities and their derivatives theoretical and computational results," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 85-134.
    12. 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.
    13. Cook, Philip J. & Moore, Michael J., 1993. "Drinking and schooling," Journal of Health Economics, Elsevier, vol. 12(4), pages 411-429, December.
    14. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    15. 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.
    16. 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.
    17. repec:cup:etheor:v:8:y:1992:i:4:p:518-52 is not listed on IDEAS
    18. Mullahy, John & Sindelar, Jody L, 1991. "Gender Differences in Labor Market Effects of Alcoholism," American Economic Review, American Economic Association, vol. 81(2), pages 161-165, May.
    19. 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.
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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. van Ours, J.C., 2005. "Cannabis, Cocaine and the Wages of Prime Age Males," Discussion Paper 2005-14, Tilburg University, Center for Economic Research.
    2. Palali, Ali, 2015. "Early Smoking, Education, and Labor Market Performance," Discussion Paper 2015-033, Tilburg University, Center for Economic Research.
    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. 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.
    5. Kim, Vitally, 2010. "Level of alcohol consumption and worker’s labor market position. Multivariate probit model approach," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 18(2), pages 53-77.
    6. repec:kap:decono:v:165:y:2017:i:3:d:10.1007_s10645-017-9290-y is not listed on IDEAS
    7. Jan C. van Ours, 2007. "The Effects of Cannabis Use on Wages of Prime-age Males," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(5), pages 619-634, October.
    8. Ziggy MacDonald & Michael Shields, "undated". "The Impact of Alcohol Use on Occupational Attainment and Wages," Discussion Papers in Public Sector Economics 98/8, Department of Economics, University of Leicester.
    9. 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.
    10. Dummann, Kathrin, 2008. "Retirement saving and attitude towards financial intermediaries: Evidence for Germany," Thuenen-Series of Applied Economic Theory 99, University of Rostock, Institute of Economics.

    More about this item


    alcohol; tobacco; simultaneous equations; maximum simulated likelihood;

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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