Abstract
In an effort to increase understanding of the “alcohol/income puzzle”—the finding that drinking appears to lead to higher income—this paper presents maximum simulated likelihood estimates of a system of limited dependent variables governing smoking and drinking patterns and income. With all else held constant, moderate drinking is associated with 10 percent higher income, and heavy drinking associated with 12 percent higher income, than drinking abstention. Smoking is associated with larger effects on income than drinking: Single-equation estimates suggest smokers earn 8 percent less than nonsmokers, and the smoking penalty rises to 24 percent after correcting for endogeneity.
- Received January 2000.
- Accepted April 2004.
This article requires a subscription to view the full text. If you have a subscription you may use the login form below to view the article. Access to this article can also be purchased.
