Forgone Earnings From Smoking : Evidence For A Developing Country

Abstract

This paper estimates the economic losses related to the negative effect of smoking on wages in a context of a developing country. Using data from 2005 Albania Living Standards Monitoring Survey, we jointly estimate a system of three equations: the smoking decision and two separate wage equations for smokers and non-smokers. The results show that, after controlling for observed characteristics and taking into account unobserved heterogeneity in personal characteristics, smoking has a substantial negative impact on wages. On average smokers' wages are 20 percent lower than the wages of similar non-smokers, providing strong evidence for the potential policy relevance of tobacco control initiatives for developing countries. September 4, 2006* The findings and interpretation of this paper are those of the authors and should not be attributed to the World Bank Group, its Executive Directors, or the countries they represent. Address for correspondence: Michael M. Lokshin, Kathleen Beegle, IntroductionIn 2000, about one out of three adults, or 1.1 to 1.2 billion people worldwide, smoked (WHO 1999). By 2010 the number of smokers is expected to grow to around 1.3 billion (FAO 2003). The vast majority of the world's smokers (82 percent) live in developing countries where, in sharp contrast to developed countries, the consumption of tobacco is on the rise. Tobacco control is increasingly seen as a public health priority, motivating campaigns such as the World Health Organization's Tobacco Free Initiative as well as country-specific tobacco control campaigns. These efforts are justified not only on grounds related to well-established adverse effects of smoking on health, but more generally on economic grounds. 1 The gross healthcare cost of smoking for the developing countries is estimated to be as high as 1.1 percent of GDP (Jha and Chaloupka 2000). The economic costs associated with losses in productivity because of smoking could be at least as large and be disproportionately incurred by the poor (The World Bank 1999).Estimates of the economic costs of smoking tend to reflect costs associated with increased premature death and health-care costs related to smoking-induced chronic diseases (which can affect smokers as well as non-smokers exposed to smoke). In addition to these pathways, there is a third category of costs that has been considered: the earnings and wage reductions associated with smoking. The literature on the relationship between smoking and labor market performance is very limited and based on data from Western Europe and the US. Berger and Leigh (1989) examine the effect of smoking and being overweight on earnings using the 1973 Quality of Employment survey in the US.Their study finds no statistically significant association between smoking and earnings for male and female workers. Levine et al. (1997) The WHO estimates that tobacco is the second major cause of death worldwide and the fourth most common risk factor for disease worldwide.3 model specification, the estimated losses in earnings fo...

The impact of tobacco control policies in Albania

“…Trends in former communist Russia 9 indicate that Albanian smoking rates, especially among females, may have increased more in the absence of the policies. Spurred by tobacco industry marketing and distribution practices, the failure to reduce smoking prevalence in Albania may be due to the social acceptability of smoking among males, 10 growing female economic independence, increasing social acceptability of female smoking 5 11 and the ongoing appeal of western products in Albania. 5 11 The higher rates of female smoking among urban than rural dwellers is indicative of the above factors' influence.…”

Smoking and wage penalty in the Brazilian labor market

“…A estratégia empírica baseia-se nos trabalhos de Levine et al (1997), Schwarze & Heineck (2003), Van Ours (2004), Auld (2005), Lokshin & Beegle (2006), Anger & Kvasnicka (2010) e Bockerman et al (2014). A abordagem mais recorrente na área é a de variáveis instrumentais (VI), que mensura o efeito do consumo do cigarro para um agente representativo sobre o valor condicional médio dos ganhos salariais, tratando essa variável explicativa como um regressor endógeno.…”

“…Nessa direção, as escolhas dos indivíduos por um estilo de vida mais saudável afetam a produção do estoque de saúde, no qual o consumo do cigarro representa uma redução no nível de investimento líquido desse estoque, G H t+1 − G H t (Grossman 1972). Como resposta da redução do investimento no capital saúde e de outras indicações comportamentais reveladas pelo consumo do produto, Levine et al (1997), Schwarze & Heineck (2003), Van Ours (2004, Auld (2005), Munasinghe & Sicherman (2006), Lokshin & Beegle (2006), Grafova & Stafford (2009), Anger & Kvasnicka (2010) e Bockerman et al (2014), mostram empiricamente que o tabagismo provoca uma penalização na taxa de retorno individual no mercado de trabalho. A Tabela 1 sumariza os resultados dos citados trabalhos.…”

Impact of smoking on the income level of Chinese urban residents: a two-wave follow-up of the China Family Panel Study

“… 10 Lokshin and Beegle used data from the 2005 Albanian Living Standards Surveillance Survey and discovered that smokers earn 20% less than non-smokers. 11 In addition, a few studies have also shown less significant relationship between smoking and individual income. Lye and Hirschberg used 1995 Australian National Health Survey data to suggest that cigarette smoking did not significantly impact personal income.…”