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Title: The Myth of the Drinker's Bonus
Resulting in 1 citation.
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Cook, Philip J. Peters, Bethany Lynn |
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The Myth of the Drinker's Bonus NBER Working Paper No. 11902, National Bureau of Economic Research, 2005. Also: http://www.nber.org/papers/w11902.pdf Cohort(s): NLSY79 Publisher: National Bureau of Economic Research (NBER) Keyword(s): Alcohol Use; Endogeneity; Health/Health Status/SF-12 Scale; Human Capital; Labor Market Demographics; Morbidity; Occupational Choice; Training, On-the-Job; Wages Drinkers earn more than non-drinkers, even after controlling for human capital and local labor market conditions. Several mechanisms by which drinking could increase productivity have been proposed but are unconfirmed; the more obvious mechanisms predict the opposite, that drinking can impair productivity. In this paper we reproduce the positive association between drinking and earnings, using data for adults age 27-34 from the National Longitudinal Survey of Youth (1979). Since drinking is endogenous in this relationship, we then estimate a reduced-form equation, with alcohol prices (proxied by a new index of excise taxes) replacing the drinking variables. We find strong evidence that the prevalence of full-time work increases with alcohol prices -- suggesting that a reduction in drinking increases the labor supply. We also demonstrate some evidence of a positive association between alcohol prices and the earnings of full-time workers. We conclude that most likely the positive association between drinking and earnings is the result of the fact that ethanol is a normal commodity, the consumption of which increases with income, rather than an elixer that enhances productivity. |
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Bibliography Citation
Cook, Philip J. and Bethany Lynn Peters. "The Myth of the Drinker's Bonus." NBER Working Paper No. 11902, National Bureau of Economic Research, 2005. |