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ISER Working Paper Series 2007-31

The smoker's wage penalty puzzle: evidence from Britain

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Publication date

21 Dec 2007

Abstract

This work investigates the effect of smoking on wages for male workers using panel data from Britain for the period of 1991-2005. The strong negative correlation of smoking and wages found in a crosssectional analysis reduces substantially when accounting for unobserved individual heterogeneity using Fixed Effects estimation. I find a statistically significant wage penalty that is causally due to smoking of about -2% for smokers over those who quit. Further analysis indicates, however, that the negative effect might be underestimated when comparing with those who never started smoking or quit a long time ago.

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working paper

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