Since the publication of the Surgeon General’s report (U.S. Department of Health, Education, and Welfare, 1964) on the harmful effects of cigarette consumption, a vast literature has emerged exploring the economic consequences of smoking. Early analyses on the economic impacts of smoking anticipated that smoking would have adverse impacts in the labor market. Such studies predicted that poor health would adversely affect productivity and raise the cost of providing health care (Luce and Schweitzer, 1978; Oster et al., 1984), thereby lowering earnings. However, precisely quantifying the effect of smoking on earnings has proven to be challenging. Comparisons between smokers and nonsmokers often reveal significant differences on observable characteristics, which raises the possibility that significant differences may also exist on unobservable characteristics. As a result, credible evidence on the effects of smoking on earnings has been elusive.....