Purpose: We used longitudinal data and instrumental variables (IVs) in a prospective design to test for the causal effects of wages on smoking prevalence among current and past smokers. Methods: Nationally representative U.S. data were drawn from the 1999-2009 waves of the Panel Study of Income Dynamics. Our overall sample was restricted to full time employed persons, aged 21-65 years. We excluded part time workers and youths because smoking and wage correlations would be complicated by labor supply decisions. We excluded adult never smokers because people rarely begin smoking after the age of 20 years. IVs were created with state-level minimum wages and unionization rates. We analyzed subsamples of men, women, the less educated, the more educated, quitters, and backsliders. Validity and strength of instruments within the IV analysis were conducted with the Sargan-Hansen J statistic and F tests. Results: We found some evidence that low wages lead to more smoking in the overall sample and substantial evidence for men, persons with high school educations or less (<13years of schooling), and quitters. Results indicated that 10% increases in wages lead to 5.5 and 4.6 percentage point decreases in smoking for men and the less educated; they also increased the average chance of quitting among base-year smokers from 17.0% to 20.4%. Statistical tests suggested that IVs were strong and valid in most samples. Subjects' other family income, including spouses' wages, was entered as a control variable. Conclusions: Increases in an individual's wages, independent of other income, decreased the prevalence of smoking among current and past smokers.
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