Substance Use and Earnings: The Case of Smokers in Germany

30 Pages Posted: 8 Apr 2003

See all articles by Guido Heineck

Guido Heineck

University of Bamberg; IZA Institute of Labor Economics

Johannes Schwarze

University of Bamberg; German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Date Written: March 2003

Abstract

This paper examines the effect of smoking behavior on earnings. Using data from the GSOEP, both cross-sectional and longitudinal models are estimated separately for males and females. Results for the cross-sectional models confirm prior analyses inasmuch as smoking has a negative effect on earnings for males. However, applying fixed-effects estimation, this effect is found to be inverted for men aged 25 to 35 years compared to their non-smoking counterparts. That is, controlling for unobservable individual heterogeneity, the result implies that male smokers are individuals with higher time preference rates. At the early stage of the age-earnings course higher earnings are therefore found for smokers because young male non-smokers only are about to start off their occupational career. Women's earnings, however, are not affected by smoking behavior.

Keywords: Smoking, Earnings Regressions

JEL Classification: I12, J30, J70

Suggested Citation

Heineck, Guido and Schwarze, Johannes, Substance Use and Earnings: The Case of Smokers in Germany (March 2003). IZA Discussion Paper No. 743. Available at SSRN: https://ssrn.com/abstract=392061

Guido Heineck (Contact Author)

University of Bamberg

Feldkirchenstr. 21
Bamberg, 96052
Germany

IZA Institute of Labor Economics ( email )

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

Johannes Schwarze

University of Bamberg ( email )

Kirschaeckerstrasse 39
Bamberg 96045
Germany
+49 951 863 2600 (Phone)
+49 951 863 5569 (Fax)

German Institute for Economic Research (DIW Berlin)

Mohrenstra├če 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

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

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