Does Bingeing Affect Earnings?* PREETY SRIVASTAVA Centre for Health Economics, Monash University, Victoria, Australia Both anecdotal and empirical lines of evidence have pointed out that frequent binge drinking has far more serious consequences than occasional bingeing. As a result, a lower penalty for heavy drinking will be estimated by combining the heavy bingers with individuals who binge on rare occasions and are not necessarily less productive. This article explores the drinking–earnings rela- tionship based on a finer distinction between frequent and occa- sional bingeing, and an extension to female subjects. It finds that frequent bingers experience reduced earnings whereas non-bingers and occasional bingers earn a positive premium over abstainers. I Introduction Heavy episodic or binge drinking has been a major concern for policy-makers worldwide. Although moderate drinking is widely consid- ered as a harmless means to relax and socialise and even beneficial to health, excessive drinking is often associated with ill health, crime, vio- lence, road fatalities and various other adverse social and psychological outcomes. Recent debate on problem drinking has also focused on its adverse impact on labour market outcomes, usually through impaired health, absenteeism and poor job performance. In Australia, Collins and Lapsley (2002) estimated drug abuse-related loss of productive capacity in the paid work- force to be around $A5.5 billion, of which alco- hol contributed around 35 per cent. Their study identified three principal ways in which drug abuse has an important impact on productivity: deaths and illnesses causing premature retire- ment; absenteeism from sickness or injury; and reduced on-the-job productivity. The relationship between alcohol use and labour market outcomes has received growing attention in the international literature, more so in the last decade. It has been argued that although excessive drinking is associated with lower earn- ings through adverse health effects, absenteeism and low productivity, light or moderate alcohol consumption seems to generate positive wage effects (see Hamilton & Hamilton, 1997; Mac- Donald & Shields, 2001; Lye & Hirschberg, 2004). These positive wage premiums are expected to arise from the beneficial health effects of drinking in moderation, such as reduced stress and tension levels (Vasse et al. , 1998) and lower incidence of heart disease and stroke (Fagrell et al. , 1999; Denke, 2000) resulting in lower absenteeism from the workplace and increased productivity. Moderate drinking is also associated with increased opportunities as a result of its ‘net- working’ effect (see Peters & Stringham, 2006). Social time with colleagues and employers may allow individuals to obtain information on any * The author is grateful to Xueyan Zhao, Paul Miller and two anonymous referees for helpful com- ments and suggestions on earlier versions of the arti- cle. Any remaining errors are those of the author. JEL classifications: C3, D1, I1 Correspondence: Preety Srivastava, Centre for Health Economics, Monash University, Vic. 3800, Australia. Email: preety.srivastava@buseco.monash. edu.au THE ECONOMIC RECORD, VOL. 86, NO. 275, DECEMBER, 2010, 578–595 578 Ó 2010 The Economic Society of Australia doi: 10.1111/j.1475-4932.2010.00638.x