The relationship between alcohol consumption and earnings

Previous studies of the relation between alcohol consumption and earnings have yielded contradictory results. Some studies have shown that drinking reduces income while others have shown it has no effect or increases earnings. This study uses medical findings concerning the relation between alcohol consumption and coronary artery disease to help resolve this contradiction and to establish the relationship between the two.

Regression analysis is used to estimate the effects on earnings of various traditional variables such as age, education and other socioeconomic variables. Using medical findings, a concave quadratic relation between earnings and alcohol consumption is tested. This specification is based on the medical finding of the curvilinear relation between coronary artery disease (CAD) and alcohol, and the notion that CAD will result in lower earnings. The estimates are made from three large data sets.

The results show that alcohol consumption has a significant effect on income. Furthermore, these results support the hypothesis that moderate drinkers have greater earnings than either abstainers or abusers. This result holds when the effects of ex-drinkers are taken into account separately. The levels of highest earnings are consistent with the levels of lowest CAD risk (i.e., 2-3.5 drinks per day).

The results help resolve apparent contradictions found in the previous literature on earnings and alcohol consumption. It is concluded that results of previous studies depended on the sample mix of abusers, moderate drinkers and abstainers. Alcohol consumption is a significant variable in explaining earnings and the nature of this relation is a concave quadratic, similar to that found in medical studies for drinking and CAD.