Biases in Estimates of the Smoking Wage Penalty

Silke Anger () and Michael Kvasnicka

No 654, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: 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.

Keywords: Smoking; wages; earnings regressions (search for similar items in EconPapers)
JEL-codes: J31 I19 C51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea and nep-lab
Date: 2006
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Working Paper: Biases in Estimates of the Smoking Wage Penalty (2006)
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