This chapter estimates the negative effect of smoking on earnings in the context of a developing country. Using data from the 2005 Albania Living Standards Measurement Survey, models are estimated by parametric and semi-parametric methods to account for the effect of observable and unobservable characteristics that could affect individual smoking decisions and earnings. Information on the smoking behaviour of parents is used to address the endogeneity of the smoking decision. The results show that, after controlling for observed individual characteristics and parental education and taking into account unobserved heterogeneity in personal characteristics, smoking is found to have a substantial negative impact on earnings. The main results are robust to a range of alternative specifications. On average, smokers’ earnings are 19–23 percent lower than the earnings of similar non-smokers.
Lokshin, M. and Beegle, K. (2011), "Chapter 6 Foregone Earnings from Smoking: Evidence for a Developing Country", Polachek, S.W. and Tatsiramos, K. (Ed.) Research in Labor Economics (Research in Labor Economics, Vol. 33), Emerald Group Publishing Limited, Leeds, pp. 209-238. https://doi.org/10.1108/S0147-9121(2011)0000033009
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