Smoking and Labor Market Outcomes: Empirical Evidence from Taiwan

Abstract

The goal of this study is to investigate the relationship between smoking and labor market outcomes, using data from Taiwan’s Panel Survey of Family Dynamics (PSFD). A combined index of individual knowledge regarding effects of smoking on health is employed as an instrumental variable (IV) to circumvent potential endogeneity of smoking behavior. The estimation results show that smoking has a significant and negative impact on labor force participation for both males and females in Taiwan. In addition, we reject the hypothesis that smoking is exogenous in estimation of the earnings equation. The IV model finds that smoking working men, relative to their nonsmoking counterparts, earn 3.07% lower wages. The smoking earning penalty, however, does not apply to Taiwanese working females. "