Alcohol Use and Earnings Revisited: New Evidence from Twin Samples

Alcohol misuse is a leading public health concern and results in substantial economic, individual, and social costs. Despite its number of consequences, debate remains about the effect of alcohol misuse on earnings with some studies finding alcohol misuse yields an earnings premium, others an earnings penalty, and still others finding equivalent earnings between drinking regimes. Borrowing from the rich economic literature on returns to schooling and the behavioral genetics literature on substance abuse, we analyze data from the Mid-Atlantic Twin Registry - a large population based sample of monozygotic, dizygotic, and opposite sex twins - in an attempt to unravel the contributions of unobserved genetic versus childhood environmental influences on observed alcohol-earnings relationships.  Among male twin pairs we find controlling for unobserved within twin pair characteristics that simultaneously influence the demand for alcohol and labor market success completely attenuates the earnings premia associated with alcohol use observed in naïve models. However, among female pairs, we find evidence that usual quantity, usual frequency, and maximum quantity of alcohol consumed remains associated with earnings premia even after controlling for these unobserved family-level characteristics.  Furthermore, differences between opposite sex pairs provide suggestive evidence that the genetic and environmental influences in play vary by gender.  Future studies with genomic data should consider the interaction of genetic markers for alcohol abuse and environmental exposures in conjunction with natural experiments offered by twin data to further elucidate how alcohol and earnings relate.