The Wage Effects of Personal Smoking History

reveals that there is no observed wage gap between former smokers and those who have never smoked. There is, however, a wage gap between those smokers who will continue smoking and three other groups of individuals: (1) those smokers who will quit smoking in the future, (2) those smokers who have quit smoking already, and (3) those who never smoked. The wage gap between smokers and non-smokers, observed in the 1986 cross-section, is largely driven by those who persist as smokers, 1986-2001. These results support the hypothesis that the cross-sectional wage differential is not driven by smoking per se, but may be driven by a non-causal explanation. One plausible interpretation is that a common factor such as myopia, leads to reduced investment in both health capital or firm-specific or other human capital.