TY  - JOUR
AU  - Cook,Philip J.
AU  - Peters,Bethany
TI  - The Myth of the Drinker's Bonus
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11902
PY  - 2005
Y2  - December 2005
UR  - http://www.nber.org/papers/w11902
L1  - http://www.nber.org/papers/w11902.pdf
N1  - Author contact info:
Philip J. Cook
Sanford School of Public Policy
Duke University
215 Sanford Building
Durham, NC 27708-0245
Tel: 919 613 7360
Fax:  919/681-8288
E-Mail: pcook@duke.edu
AB  - 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 %u2013 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.
ER  -