The Myth of the Drinker’s Bonus

The drinker’s bonus — the finding that drinkers of alcohol earn more than non-drinkers — is one of my favorite spurious correlations, and there is a new paper out confirming its existence, while speculating about its cause:

Drinkers earn more than non-drinkers, even after controlling for human capital and local labor market conditions. Several mechanisms by which drinking could increase productivity have been proposed but are unconfirmed; the more obvious mechanisms predict the opposite, that drinking can impair productivity.

…We find strong evidence that the prevalence of full-time work increases with alcohol prices – suggesting that a reduction in drinking increases the labor supply. We also demonstrate some evidence of a positive association between alcohol prices and the earnings of full-time workers.

We conclude that most likely the positive association between drinking and earnings is the result of the fact that ethanol is a normal commodity, the consumption of which increases with income, rather than an elixer that enhances productivity.

Oh, darn!

Related posts:

1. The Myth of the Myth of Disruptive Technology
2. The Myth of Portable Alpha
3. Bank Bonus Seasons & I-Banker Migration
4. The Long Tail, and Alcohol Poisoning
5. The Web 2.0 Drinking Game