The Effect of Alcohol Consumption on Earnings



The effect of alcohol consumption on the earnings of full-time male workers is analysed using the Australian National Health Survey 1989–90. A multinomial logit choice model is used to explain workers’ choice of drinking status and to correct for selection bias in the earnings equation estimation. It is found that moderate drinking leads to a significant earnings premium relative to abstention and heavy drinking. The results are consistent with moderate drinking improving individual’s health and hence productivity and earnings.