Even One is Too Much: The Economic Consequences of Being a Smoker

FRB Atlanta Working Paper Series 2013-3

32 Pages Posted: 26 Nov 2013

See all articles by Julie L. Hotchkiss

Julie L. Hotchkiss

Federal Reserve Bank of Atlanta; Georgia State University - Department of Economics

M. Melinda Pitts

Federal Reserve Bank of Atlanta

Date Written: July 1, 2013

Abstract

It is well known that smoking leads to lower wages. However, the mechanism of this negative relationship is not well understood. This analysis includes a decomposition of the wage gap between smokers and nonsmokers, with a variety of definitions of smoking status designed to reflect differences in smoking intensity. This paper finds that nearly two-thirds of the 24 percent selectivity-corrected smoking/nonsmoking wage differential derives from differences in characteristics between smokers and nonsmokers. These results suggest that it is not differences in productivity that drive the smoking wage gap. Rather, it is differences in the endowments smokers bring to the market along with unmeasured factors, such as baseline employer tolerance. In addition, we also determine that even one cigarette per day is enough to trigger the smoking wage gap and that this gap does not vary by smoking intensity.

Keywords: smoking wage penalty, wage decomposition, wage differentials

JEL Classification: J31, I19, C31

Suggested Citation

Hotchkiss, Julie L. and Pitts, M. Melinda, Even One is Too Much: The Economic Consequences of Being a Smoker (July 1, 2013). FRB Atlanta Working Paper Series 2013-3. Available at SSRN: https://ssrn.com/abstract=2359224 or http://dx.doi.org/10.2139/ssrn.2359224

Julie L. Hotchkiss

Federal Reserve Bank of Atlanta ( email )

Research Department
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Georgia State University - Department of Economics ( email )

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M. Melinda Pitts (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-7009 (Phone)
404-498-8956 (Fax)

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