intertemporal substitution

Author
Abstract

The lifecycle labor supply model has been proposed as an
explanation for various dimensions of labor supply, including
movements over the business cycle, changes with age, and within-
person variation over time. According to the model, all of these
elements are tied together by a combination of intertemporal
substitution effects and wealth effects. This paper offers an
assessment of the model's ability to explain the main components of
labor supply, focusing on microeconometric evidence for men.

Year of Publication
1990
Number
269
Date Published
09/1990
Publication Language
eng
Citation Key
In Christopher Sims, editor, Advances in Econometrics, Sixth World Congress, New York: Cambridge University Press 1994
Card, D. (1990). Intertemporal Labor Supply: An Assessment. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01r494vk188 (Original work published September 1990)
Working Papers
Year of Publication
1984
Number
182
Date Published
11/1984
Publication Language
eng
Citation Key
In Labor Economics, Volume I, ed. Orley Ashenfelter and Kevin Hallock (Aldershot, U.K. and Brookfield, VT.:Elgar; Ashgate, 1995)
Altonji, J. (1984). Intertemporal Substitution in Labor Supply: Evidence from Micro Data. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01hd76s005c (Original work published November 1984)
Working Papers
Author
Abstract

This paper considers the importance of minimum hours thresholds
for the interpretation of individual labor supply data. An analysis
of quarterly labor supply outcomes for prime-age males in the Survey
of Income and Program Participation suggests that such thresholds are
an important aspect of weekly hours choices. A simple contracting
model is presented that incorporates mobility costs and a non-
convexity in the relation between weekly hours and effective labor
input. This non-convexity gives rise to a two-part employment
schedule. In periods of low demand, some individuals are temporarily
laid off, while others work a minimum threshold level of hours. In
periods of higher demand all available workers are employed at hours
in excess of the threshold level. The model provides a simple
interpretation for the role of demand-side variables in explaining
annual labor supply outcomes. It can also explain the weak
correlations between annual hours and average hourly earnings that
have emerged in earlier studies. Under suitable assumptions on
preferences the intertemporal labor supply elasticity can be
recovered from the relationship between earnings and hours per week.
Estimation results for the SIPP panel yield elasticity estimates that
are similar to those in the literature based on annual data. If the
model is correct, however, annual labor supply is considerably more
sensitive to changes in productivity than these estimates suggest.

Year of Publication
1990
Number
262
Date Published
02/1990
Publication Language
eng
Citation Key
Carnegie Rochester Conference on Public Policy, 33, 1990
Card, D. (1990). Labor Supply with a Minimum Hours Threshold. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01j098zb10c (Original work published February 1990)
Working Papers