THE WAGE EFFECTS OF PERSONAL SMOKING HISTORY

This study explores determinants of the wage penalty borne by smokers. The au thors 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. An apparent causal relationship between smoking and coronary heart disease was reported at Mayo Clinic in 1940. Since that time the various costs that smokers impose on themselves and others have been extensively studied and widely and continually broadcast in public and even private advertising cam paigns. It has been established that smoking adversely affects one's health and often causes premature death and increased health care costs. Smoking is empirically shown to b