Alcohol Consumption and Unemployment
- Presenter:
Chair: Edward Norton; Discussant: Euna Han Mon June 5, 2006 13:45-15:15 Room 226
This paper analyzes how alcohol consumption affects the probability of being unemployed using data from the 2001-2002 National Epidemiologic Survey on Alcohol and Related Conditions (NESARC). In order to address the simultaneity between labor market performance and alcohol use, I estimate a maximum likelihood instrumental variables (IV) probit model. The age of drinking onset is used as an IV which proves to be a strong and valid identifying variable for alcohol use in the context of employment outcomes. Results indicate that there are substantial differences between standard probit estimates and the IV estimates. Controlling for all other factors, standard probit results suggest that men who drink more are more likely to be unemployed. However, this effect becomes statistically insignificant in the MLE results once I control for endogeneity. Finally, I also show that some IVs commonly used in the past studies fail to pass validity tests indicating that they might not be ideal candidates for an IV method.
