While excessive drinking is associated with lower earnings through adverse health effects, absenteeism and low productivity, moderate acohol consumption has been argued to generate positive wage effects. These positive wage premiums are usually expected to arise from the social effect of drinking and the beneficial health consequences of drinking in moderation.
Using unit-record data from the Australian National Drug Strategy Household Survey, this paper examines the impact of drinking patterns on individuals’ earnings, controlling for selectivity bias driven by the endogenous relationship between drinking and earnings.
In particular, a Multinomial Logit Selectivity model is estimated for four drinking statuses.
This study shows that frequent bingeing is associated with reduced earnings whilst non bingers and occasional bingers earn a positive premium over abstainers.
Further, a decomposition of the earnings differentials indicates that, across various occupations, abstainers are at least as, if not more, ‘productive’ than drinkers and frequent bingers are less ‘productive’ than non bingers and occasional bingers.
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