The Dynamics of the Smoking Wage Penalty

Michael Darden, Julie Hotchkiss and Melinda Pitts

No 27567, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Cigarette smokers earn significantly less than nonsmokers, but the magnitude of the smoking wage gap and the pathways by which it originates are unclear. Proposed mechanisms often focus on spot differences in employee productivity or employer preferences, neglecting the dynamic nature of human capital development and addiction. In this paper, we formulate a dynamic model of young workers as they transition from schooling to the labor market, a period in which the lifetime trajectory of wages is being developed. We estimate the model with data from the National Longitudinal Survey of Youth, 1997 Cohort, and we simulate the model under counterfactual scenarios that isolate the contemporaneous effects of smoking from dynamic differences in human capital accumulation and occupational selection. Results from our preferred model, which accounts for unobserved heterogeneity in the joint determination of smoking, human capital, labor supply, and wages, suggest that continued heavy smoking in young adulthood results in a wage penalty at age 30 of 14.8% and 9.3% for women and men, respectively. These differences are less than half of the raw difference in means in wages at age 30. We show that the contemporaneous effect of heavy smoking net of any life-cycle effects explains roughly 67% of the female smoking wage gap but only 11% of the male smoking wage gap.

JEL-codes: I10 I12 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-lma
Note: EH
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published as Darden, Michael E. & Hotchkiss, Julie L. & Melinda Pitts, M., 2021. "The dynamics of the smoking wage penalty," Journal of Health Economics, Elsevier, vol. 79(C).
Published as Michael E. Darden & Julie L. Hotchkiss & M. Melinda Pitts, 2021. "The dynamics of the smoking wage penalty," Journal of Health Economics, vol 79.

Downloads: (external link)
http://www.nber.org/papers/w27567.pdf (application/pdf)

Related works:
Journal Article: The dynamics of the smoking wage penalty (2021)
Working Paper: The Dynamics of the Smoking Wage Penalty (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:27567

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w27567

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().