Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics

38 Pages Posted: 28 Feb 2000

See all articles by Lalith Munasinghe

Lalith Munasinghe

Barnard College, Columbia University

Nachum Sicherman

Columbia University; IZA Institute of Labor Economics

Date Written: December 3, 1999

Abstract

The discount rate is a key determinant of investments in human capital and occupational choice. Individuals who are less future oriented - i.e. have a higher discount rate - are less likely to invest in human capital and hence more likely to select into careers with lower and flatter earnings profiles. Since an individual's discount rate is unobservable, we use smoking behavior as a proxy to study the role of discounting on wage dynamics. Using data from the National Longitudinal Surveys of Youth (1979-94) we find that smokers, compared to their non-smoker counterparts, earn lower wages at the time they first enter the labor market and experience substantially lower rates of wage growth in the first decade of their careers. These differences in wage dynamics among smokers and non-smokers are consistent with discounting hypothesis, and highly robust to an extensive array of control variables.

JEL Classification: J2, J3

Suggested Citation

Munasinghe, Lalith and Sicherman, Nachum, Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics (December 3, 1999). Available at SSRN: https://ssrn.com/abstract=203162 or http://dx.doi.org/10.2139/ssrn.203162

Lalith Munasinghe

Barnard College, Columbia University ( email )

3009 Broadway
New York, NY 10027
United States
212-854-5652 (Phone)

Nachum Sicherman (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States
212-854-4464 (Phone)
212-316-9355 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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