The Wage effects of personal smoking history

This study explores determinants of the wage penalty borne by smokers. The authors reconstruct individual smoking histories by pooling PSID (Panel Study of Income Dynamics) data for 1986-2001. They find no wage gap between former smokers and those who had never smoked, but statistically significant wage gaps between smokers who would continue smoking and three other groups: those Who Would later quit smoking, those who had quit smoking already, and those who never smoked. The wage penalty for smoking, observed in the 1986 cross-section, is largely driven by those who would continue smoking over the years 1986-2001. These results suggest that the smoker/nonsmoker wage differential observed at any given time may be driven by a non-causal explanation rather than by smoking per se. For example, persistent smokers may be characterized by myopia that leads to reduced investment in health capital and firm-specific or other human capital.