Document Type

Report

Publication Date

11-1999

Number

330

Abstract

Health, like schooling, is a form of human capital and can be expected to be positively related to labor productivity and labor supply. The production of good health and labor productivity, however, sometimes competes with an individual's lifestyle, e.g., binge drinking. In this study, an individual's health has three dimensions: current health status, binge drinking which is an unhealthy lifestyle, and stature or mature height which is a young adult's health endowment. This study presents and fits a dynamic model of an individual's demand for health, demand for binge drinking, labor supply, and wage or demand for labor equationsto the NLSY 1979 cohort panel data ofyoimg people. We find that binge drinking has a negative but insignificanteffect on the demand for health, an individual's good health and larger stature increase his/her wage and binge drinkingreduces it. An individual's good health and binge drinking increase his/herlaborsupply. An individual's decision to binge drinking is shown to be rational addiction which is forward looking (rather than myopic which ignores future impacts) and to be highly responsive to the price of alcohol in the long run and to the legal minimum drinking age. We also show thatlabor productivity of 1979 NLSY cohort ismost likely 6percent lower than earlier cohorts due totheir higher frequency of binge drinking, shorter stature, and lower educational achievement

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