Effect of Smoking and Other Economic Variables on Wages in the Euro Area

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.JEL codes: C18, I12, J31, O51

Passive Smoking Behaviour and Individual Productivity in Indonesia

“…However, those correlations are statistically insignificant. The direction of that coefficient is in line with the previous studies (Levina et al 1997;Ours 2004, Kvasnica 2010Bondzie 2016).…”

“…Both using Fixed Effect and IV method show a negative correlation between smoking behavior of husbands and number of working hours of their wives, but the coefficient is quite small: 0.0028 and 1.18 percentage points respectively and statistically insignificant. Furthermore, the other explanatory variables such as age and the educational level show the regression results with expected signs and in line with previous studies (Levina et al 1997;Ours 2004;Bondzie 2016;Amalia 2018). The increase of the age of wives leads to an increase in their income and number of working hours, but the age has a turning point or parabolic shape described in the age square variable.…”

“…Nevertheless, the regression results of OLS are different from the previous studies conducted by Levina et al (1997) and Bondzie (2016) who research the impact of active smoking behavior on individual productivity. Both of those papers also use the OLS method as comparison results with other methods.…”

“…Moreover, some researchers have analyzed that passive smoking is even more dangerous than active smoking (Schick and Glantz 2005;Raupach et al 2005) because people who inhale side-stream smoke will be contaminated with four times as much toxic substance as the smoke that is inhaled by active smokers. Besides affecting the health sector, smoking behavior also indirectly influences individual productivity (Levina et al 1997;Halpren et al 2001;Ours 2004;Braakman 2008;Bondzie 2016;Amalia 2018). However, those studies only focus on the impact of active smoking behavior, while research related to passive smoking behavior mostly focuses on the health sector (Well 1998;McGhee et al 2002;Yolton et al 2004;Yang et al 2016;Dartanto et al 2018).…”

Tobacco Tax Reform at the Crossroads of Health and Development

“…Current smokers have been found to earn less than non-smokers, even after controlling for education: 1-8 percent less in the United States (Leigh and Berger 1989;Levine et al 1997), 8 percent less in Canada (Auld 1998), and 10 percent less among male workers in the Netherlands (van Ours 2004). In Europe, smoking reduced wages by up to 22.7 percent (Bondzie 2016). A study using longitudinal data representing the U.S. population suggests that smoking has a negative effect on wages via health status, but also via other common factors among persistent smokers such as myopia that leads to reduced investment in human capital, including health (Grafova and Stanfford 2009).…”