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Author: Peters, Bethany Lynn
Resulting in 2 citations.
1. Cook, Philip J.
Peters, Bethany Lynn
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.
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.
2. Peters, Bethany Lynn
Alcohol Consumption and Productivity
Ph.D. Dissertation, Duke University, 2002. DAI-A 63/09, p. 3293, Mar 2003
Cohort(s): NLSY79
Publisher: Sage Publications
Keyword(s): Alcohol Use; Earnings; Endogeneity; Labor Market Outcomes; Modeling, Fixed Effects; Social Roles; Wage Models

Permission to reprint the abstract has not been received from the publisher.

My research documents the relationship between drinking and earnings with two different data sets and populations, and then investigates the possibility that the association is due to a direct causal connection through the mechanism of social capital. I document the positive relationship of drinking and earnings for a population of military personnel by use of the Worldwide Survey of Alcohol and Non-Medical Drug Use. I consistently find that abstainers earn less than drinkers, even when controlling for the endogeneity of the drinking decision. I then turn to the National Longitudinal Survey of Youth, which has had drinking items for eight waves between 1982 and 1994. The NLSY data are very rich, providing data necessary to control for religion, ethnicity; family background, personality type, aptitude, local labor market conditions, a cumulative measure of work experience, and much else. I find that the wage premium for drinkers is quite robust for both male and female full-time workers. Further evidence about the nature of this relationship is obtained from estimates that take advantage of the panel structure and include individual fixed effects. In those estimates the estimated effect of drinking on earnings disappears, suggesting that the year-to-year variations in drinking status (for those individuals who do vary) are not associated with earnings. But those who self-report drinking in every wave of the survey earn substantially more than those who always report abstaining or who vary over time. These results suggest that if there is an effect of drinking on earnings, it is cumulative rather than contemporaneous. One interesting possibility is that the cumulative effect occurs through social capital accumulation. Personal connections and reputation are important in the labor market. Individuals who conform to the social environment will have better job opportunities because they will have more of those connections. Since drinking is the social lubricant, abstainers may lose out, especially in wet environments. I test this hypothesis by interacting individual drinking with measures of drinking in the relevant environment. I find that drinking is beneficial to wages for men only in states with a relatively high drinking prevalence.
Bibliography Citation
Peters, Bethany Lynn. Alcohol Consumption and Productivity. Ph.D. Dissertation, Duke University, 2002. DAI-A 63/09, p. 3293, Mar 2003.