An analysis of the effect of alcohol consumption on household income in Ireland comparing Limited and Full Information Methods of Estimation
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Abstract
This paper presents a study of the effects of alcohol consumption on household income in Ireland using the Slán 2007 dataset, accounting for endogeneity and selection bias. Drinkers are categorised into one of three categories; non, moderate and heavy drinkers, based on the recommended weekly drinking levels by the Irish Health Promotion Unit. Previous studies into the effect of alcohol on income have not accounted for the fact that alcohol consumption can be viewed as ordered data. This study accounts for the ordinality of alcohol consumption. Limited and Full Information Methods of Estimation are compared and the effect of alcohol consumption on income is estimated using both methods of estimation. Results from both methods of estimation show that income for moderate drinkers is higher than abstainers or heavy drinkers. The difference in income between moderate drinkers and heavy drinkers is much greater when using the FIML method, with income of heavy drinkers being far less than that of moderate drinkers and substantially less than non-drinkers.
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ORMOND, Gillian; MURPHY, Rosemary.
An analysis of the effect of alcohol consumption on household income in Ireland comparing Limited and Full Information Methods of Estimation.
Journal of Economics and Banking, [S.l.], n. 2, june 2015.
ISSN 2376-2160.
Available at: <https://esmed.org/MRA/econ/article/view/112>. Date accessed: 20 apr. 2024.
doi: https://doi.org/10.18103/jeb.v0i2.112.
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Zarkin, G., French, M., Mroz, T. and Bray, J. (1998). Alcohol use and wages: new results from the National Household Survey on Drug Abuse. Journal of Health Economics 17: 53-68.
Zhang, H. (2004) Self Selection and Wage Differentials in Urban China: A Polychotomous Model with Selectivity. Cambridge, Department of Urban Studies and Planning, Massachusetts Institute of Technology.
Zhang, Y., Hannum, E. and Wang, M. (2008). Gender-Based employment and Income Differences in Urban China: Considering the Contributions of Marriage and Parenthood. Social Forces 86(4): 1529-1560.
Adepoju, A. (2009). Comparative assessment of simultaneous equation techniques to correlated random deviates. European Journal of Scientific Research 28(2): 253-265.
Adepoju, A. and Olaomi, J. (2009). Ranking of simultaneous equation techniques to small sample properties and correlated random deviates. Journal of Mathematics and Statistics 5(4): 260-266.
Agunbiade, D. and Iyaniwura, J. (2010). Estimation under Multicollinearity: A Comparative Approach Using Monte Carlo Methods. Journal of Mathematics and Statistics 6(2): 183-192.
Ahituv, A and Lerman, R (2007). How Do Marital Status, Work Effort and Wage Rate Interact? Demography 44(3): 623-647.
Barreto, H. and Howland, F, (2006). Introductory Econometrics: using Monte Carlo simulation with Microsoft Excel. Cambridge University press.
Barrett, G. (2002). The Effect of Alcohol Consumption on Earnings. Economic Record 78(1): 79-96.
Berger, M. and Leigh, J. (1988). The Effect of alcohol use on wages. Journal of Applied Economics 20: 1343-1351.
Berry, W. and Feldman, S. (1985). Multiple Regression in Practice. Beverly Hills, CA: Sage Publications, Inc.
Chenhall, R and Moers, F. (2007) The Issue of endogeneity within Theory-Based, Quantitative Management Accounting Research. European Accounting Review 16(1): 173-195.
Chiburis, R. and Lokshin, M. (2007). Maximum Likelihood and two-step estimation of an ordered probit selection model. The Stata Journal 7(2): 167-182.
Department of Health, Ireland (2012). Steering Group Report on a National Substance Misuse Strategy. February 2012.
Di Pietro, G. and Pedace, L. (2008). Changes in the returns to education in Argentina. Journal of Applied Economics XI(2): 259-279.
Enders, C.K. & Bandalos, D.L. (2001). The relative performance of full information maximum likelihood estimation for missing data in structural equation models. Structural Equation Modeling: A Multidisciplinary Journal 8(3), 430-457.
French, M. and Zarkin, G. (1995). Is moderate alcohol use related to wages? Evidence from four worksites. Journal of Health Economics 14: 319-344.
French, M. and Zarkin, G. (1995). Is moderate alcohol use related to wages? Evidence from four worksites. Journal of Health Economics 14: 319-344.
Greene, W. (2002). Econometric Analysis. 5th Edition. Upper Saddle River, New Jersey: Practice Hall.
Grossman, M. (1972). On the concept of health capital and the demand for health. Journal of Political Economy, Mar/Apr72, 80(2): 223-255.
Gujarati, D. (2004). Basic Econometrics. McGraw-Hill, Fourth Edition.
Hamilton, V. and Hamilton, B. (1997). Alcohol and Earnings; does drinking yield a wage premium? Canadian Journal of Economics 30(1): 135-151.
Harris, M., Ramful, P. and Shao, Z.(2006). An ordered generalised extreme value model with application to alcohol consumption in Australia. Journal of Health Economics 25: 782–801.
Health Service Executive (2008). (URL:http://www.hse.ie/eng/services/news/Image_Bank/Alcohol_Awareness_Posters.pdf)
(Accessed: 2008).
Heckman, J (1979).Sample Selection Bias as a specification error. Econometrica 47(1): 153-161.
Heien, D. (1996). Do Drinkers Earn Less? Southern Economic Journal Vol. 63: 60-68.
Hilmer, M. (2001). A comparison of alternative specifications of the college attendance equation with an extension to two-stage selectivity-correction models. Economics of Education Review 20: 263–278.
Intriligator, M., Bodkin, R. and Hsiao, C. (1996). Econometric Models Techniques and Applications. 2nd Edition. Upper Saddle River, NJ: Prentice Hall, 1996.
Jones, A. (2005). Applied Econometrics for Health Economists – A Practical Guide. Second Edition. Department of Economics and Related Studies, University of York.
Judge, G., Hill, R., Griffiths, W., Lutkepohl, H. and Lee, T. (1988). Introduction to Theory and Practice of Econometrics. Wiley and Sons.
Kennedy, P. (2003). A guide to econometrics. MIT Press. Fifth Edition.
Lee, L. (1982). Some Approaches to the Correction of Selectivity
Bias. The Review of Economic Studies, Vol. 49: 355-372.
Loh, E. (1996) Productivity Differences and the marriage premium for white males. Journal of Human Resources 31: 566-89.
Lye, J. and Hirschberg, J. (2004). Alcohol consumption, smoking and wages. Applied Economics 36: 1807-1817.
Maddala, G. (1983) Limited Dependent and Qualitative Variables in Econometrics. Cambridge University Press, New York.
McKelvey, R. and Zavoina, W (1975). A Statistical model for the analysis of ordinal level dependent variables. Journal of Mathematical Sociology 4:103-120.
Pearce, D. (1986). Dictionary of Modern Economics. 3rd Edition. London: Macmillan.
Puhani, Patrick (2000). The Heckman Correction for Sample Selection and its Critique. Journal of Economic Surveys 14(1): 53-68.
Schoeni, R. (1995). Marital Status and Earnings in Developed Countries. Journal of Population Economics 8:351-359.
Sherkat (2004). Religious intermarriage in the United States: trends, patterns, and predictors. Social Science Research 33: 606-625.
Von Fintel, D. (2007). Dealing with Earnings Bracket Responses in Household Survey – How Sharp are Midpoint Imputations. South African Journal of Economics 75(2): 293-312.
Wonnacott, T. and Wonnacott, R. (1979). Econometrics. Wiley and Sons. Second Edition.
Zarkin, G., French, M., Mroz, T. and Bray, J. (1998). Alcohol use and wages: new results from the National Household Survey on Drug Abuse. Journal of Health Economics 17: 53-68.
Zarkin, G., French, M., Mroz, T. and Bray, J. (1998). Alcohol use and wages: new results from the National Household Survey on Drug Abuse. Journal of Health Economics 17: 53-68.
Zhang, H. (2004) Self Selection and Wage Differentials in Urban China: A Polychotomous Model with Selectivity. Cambridge, Department of Urban Studies and Planning, Massachusetts Institute of Technology.
Zhang, Y., Hannum, E. and Wang, M. (2008). Gender-Based employment and Income Differences in Urban China: Considering the Contributions of Marriage and Parenthood. Social Forces 86(4): 1529-1560.