The Spillover Effects of Smoking

In this thesis, I explore the spillover effects of smoking. In the first chapter, I examine the labor market effects of smoking. Earnings comparisons between smokers vis-à-vis non-smokers consistently show that smokers tend to earn less. Understanding the causes of these earnings differences has been challenging. I use twins and sibling models to reduce concerns of unobserved heterogeneity in the decision to smoke. Then, I estimate the effect of smoking on earnings and disentangle the earnings loss arising from differential productivity due to addiction and differences in earnings due to employer provided health insurance. Overall, I find smokers earn less than non-smokers and employer supplied health insurance is one causal pathway that contributes to the difference. In the next chapter, I continue to examine spillovers and investigate intergenerational spillovers arising from smoking. I exploit exogenous variation in state cigarette taxes to estimate the causal impact of in-utero smoke exposure on multiple measures of children’s well-being such as asthma, severity of asthma, and health status. I find an economically and statistically significant reduction in asthma rates. A one-dollar increase in state excise taxes reduces the prevalence of asthma by 1.7 percentage points with larger reductions for non-white children and children from poorer households.