Biases in Estimates of the Smoking Wage Penalty

Empirical studies on the earnings effects of tobacco use have found significant wage penalties attached to smoking. We produce evidence that suggests that these estimates are significantly upward biased. The bias arises from a general failure in the literature to control for the past smoking behavior of individuals. 2SLS earnings estimates show that the smoking wage penalty is reduced by as much as a third, if past smoking of individuals is controlled for. Our results also point to significant wage gains for individuals that quit smoking, a finding that is of substantial interest, given the lack of evidence on the earnings effects of smoking cessation.

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Year of publication:	2006
Authors:	Anger, Silke ; Kvasnicka, Michael
Institutions:	DIW Berlin (Deutsches Institut für Wirtschaftsforschung)
Subject:	Smoking \| wages \| earnings regressions

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Extent:	application/pdf
Series:	Discussion Papers of DIW Berlin. - ISSN 1619-4535.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 654 11 pages long
Classification:	J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc ; I19 - Health. Other ; C51 - Model Construction and Estimation
Source:	RePEc - Research Papers in Economics