Abstract

We investigate the effect of health and health-related habits on earnings in China using panel data to control for unobserved heterogeneity related to individual traits and job characteristics. Health-related habits include smoking cigarettes, drinking tea, frequency of drinking alcohol, and physical exercising. We find a significant and large impact of reported health status on earnings, controlling for schooling, experience, the unobserved individual heterogeneity and job heterogeneity. We also find that smoking has strong negative effects on earnings net of health status, but statistically insignificant effects of other health-related activities on earnings.