Abstract
Abstract. The smoking effects on wages has been examined in this work using different econometric methodologies with the use of European Community Household Panel (ECHP) datasets. We employ econometric tools like Instrumental Variable technique, Heckman correction factor, Endogenous Switching and matching estimates. The initial results from regression estimates (OLS and IV methods) revealed that the wage gap between smokers and non-smokers ranges 1% to 22.7%. Moreover, endogenous switching and matching estimator also showed a negative average treatment effect of approximately 47% and 4.3% to 6.9% respectively. Thus smokers observed less wage effects is explained in part by real effects on their health status and a measure of unobserved preferences.
Keywords. Smoking, Wages Differentials, Econometric Approaches and Euro Area.
JEL. C18, I12, J31, O51.
References
Achen, C.H., (1986). The Statistical Analysis of Quasi-Experiments. Berkeley, CA: University of California Press
Adhikari, B., Kahende, J., Malarcher, A., Pechacek, T., & Tong V., (2008). Smoking-Attributable Mortality, Years of Potential Life Lost, and Productivity Losses—United States, 2000–2004. Morbidity and Mortality Weekly Report, 57(45), 1226–1228.
Anger, S., & Kvasnicka, M., (2010). Does smoking really harm your earnings so much? Biases in current estimate of the smoking wage penalty. Applied Economic Letters; 17(6), 561-564. doi. 10.1080/13504850802260846
Angrist, J.D. & Kruger, A.B., (1991). Does compulsory school attendance affects schooling and earnings? Quarterly Journal of Economics. 106(4), 979-1014.
Angrist, J.D. & Pischke, J.S., (2009). Mostly Harmless Econometrics: An Empiricist’s Companion, Princeton University Press, Princeton, NJ.
Auld, M.C. (1998). Wage, Alcohol Use, And Smoking: Simultaneous estimates. Discussion Paper, No. 98/08, Department of Economics, University of Calgary.
Becker, G., (1964). Human capital: A theoretical and empirical analysis with special reference to education, National Bureau of Economic Research, No. 80.
Berger M.C., & Leigh J.P. (1989). Schooling, self-selection and health. Journal of Human Resource, 24(3), 433–455. doi. 10.2307/145822
Bertera, R.L. (1991). The effects of behavioral risks on absenteeism and health-care costs in the workplace. Journal of Occupational Medicine, 33(11), 1119-1123.
Blake, G.H., Abell T.D., & Stanley W.G.,(1988). Cigarette smoking and upper respiratory infection among recruits in basic combat training. Annals of Internal Medicine, 109(3), 198–202.
Braakman, N., (2008). The smoking wage penalty in the United Kingdom: Regression and matching evidence from the British Household panel survey. University of Luneburg Working Paper Series in Economics. No 96.
Burda, M. & Wyplosz, C. (2005). Macroeconomics: A European Text, Oxford University Press Inc., New York.
Conway, T.L., & Cronan, T.A. (1992). Smoking, exercise, and physical fitness. Preventive Medicine, 21(6), 723-734. doi. 10.1016/0091-7435(92)90079-W
Frieze, I H., Olson, J.E., & Russell, J. (1991). Attractiveness and income for men and women in management. Journal of Applied Social Psychology, 21(13), 1039–1057. doi. 10.1111/j.1559-1816.1991.tb00458.x
Grossman, M. (1972). The demand for health: A theoretical and empirical investigation. Occasional Papers No. 119. New York: Columbia University Press.
Grossman, M. (1972). On the concept of human capital and the demand for health, Journal of Political Economy, 80(2), 223-255. doi. 10.1086/259880
Heckman, J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161. doi. 10.2307/1912352
Heijdra, B. J., & van der Ploeg, F. (2002). Foundations of modern macroeconomics, Oxford University Press Inc., New York.
Heineck, G. & Schwarze, J. (2003). Substance use and earnings: the case of smokers in Germany, Discussion paper, IZA DP No.743.
Hoad, N. A., & Clay, D. N. (1992). Smokinig impairs the response to a physical training regime: A study of officer cadets. Journal of the Royal Army Medical Corps, 138(3), 115- 117.
Kristein, M.M. (1983). How much can business expect to profit from smoking cessation?, Preventive Medicine, 12(2), 358–81. doi. 10.1016/0091-7435(83)90245-1
Lee, Y. (1999). Wage Effects Of drinking and smoking: an analysis using Australian Twins Data. University of Western Australia Working Paper, 99‐122.
Leigha J.P & Schembri, M, (2004). Instrumental variables technique: cigarette price provided better estimate of effects of smoking on SF-12, Journal of Clinical Epidemiology 57, 284–293.
Levine, P.B., Gustafson, T.A., & Velenchik, A.D. (1997). More bad news for smokers? The effect of cigarette smoking on wages, Industrial and Labor Relations Review, 50(3), 493–509. doi. 10.1177/001979399705000307
Martel, L. F., & Biller, H. B. (1987). Stature and Stigma: The Biopsychosocial Development of Short Males. Lexington, Mass.: Lexington Books.
Napier, K. (1996). Cigarettes: What the Warning Label Doesn’t Tell You. TheFirst Comprehensive Guide to the Health Consequences of Smoking. (with editing by William M. London, Elizabeth M. Whelan, and Andrea Golaine Case).New York: American Council on Science and Health.
Stiglitz, J.E. (1986). Theories of wage rigidity. in Butkiewicz, J. L., Koford, K. J., and Miller, J. B. editors, Keynes’ Economic Legacy: Contemporary Economic Theories, Praeger, New York.
van Ours, J. C. (2004). A pint a day raises a man’s pay; but smoking blows that gain away, Journal of Health Economics, 23(5), 863-886. doi. 10.1016/j.jhealeco.2003.12.005
Wooldridge, J., (2002). Econometric Analysis of Cross Section and Panel Data. Cambridge: MIT Press.
