P9

The Relationship between Education and Smoking: Evidence from a Life-Cycle Model

Kevin Thom1, Steffen Reinhold 1
1New York University, USA, 2MEA, University of Mannheim, Germany

A negative relationship between education and risky behaviors such as smoking is well established. However, little is known about the causal mechanisms or the patterns of correlation between education and unobservables that drive this relationship. We develop a life-cycle model of rational smoking in which forward-looking agents make decisions based on preferences, incomes, and the future health and mortality risks of smoking. Individuals are heterogeneous with respect to their discount rates, their propensities for bad health, and their mean incomes. The distribution of these parameters is allowed to vary across educational groups. Using data from the German Socio-Economic Panel, we estimate the parameters of the model and assess the importance of parameter heterogeneity in explaining the education-smoking gradient. Exogenous regional variation in mandatory schooling requirements in Germany also permits us to isolate the causal impact of education on smoking through the model parameters.

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