# labor supply

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This paper examines tax return-generated data on the labor force behavior of people
before and after they receive inheritances. The results are consistent with Andrew Camegie’s
century-old assertion that large inheritances decrease a person's labor force participation. For
example, a single person who receives an inheritance of about $150,000 is roughly four times more likely to leave the labor force than a person with an inheritance below$25,000.
Additional, albeit weaker, evidence suggests that large inheritances depress labor supply, even
when participation is unaltered.

Year of Publication
1992
Number
302
Date Published
03/1992
Publication Language
eng
Citation Key
The Quarterly Journal of Economics, May 1993
Rosen, H. ., Holtz-Eakin, D. ., & Joulfaian, D. . (1992). The Carnegie Conjecture: Some Empirical Evidence. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01nc580m66w (Original work published March 1992)
Working Papers
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Low-wage labor markets are traditionally viewed as competitive,
and the possibility of strategic behavior by employers is dismissed.
However, such behavior is not impossible. This paper investigates the
possibility of tacit collusion by low-wage employers while setting wages.
A game-theoretic explanation along the lines of the Folk theorem is offered,
suggesting that a non-binding minimum wage may serve as a
focal point for tacit collusion, proposing a symmetric solution to an
infinitely played game of wage-setting. Several empirical techniques
were employed in testing the hypothesis, including hurdle models of
collusion. CPS monthly data is used for the years 1990-2005, covering
the last four federal minimum wage increases. The likelihood of collusion
at minimum wage is evaluated, as well as its dynamics during
this period. The results generally support the collusion hypothesis and
suggest that employers respond strategically to changes in minimum
wage legislation while using the statutory minimum wage as a coordination
tool in tacit collusion.

Year of Publication
2008
Number
542
Date Published
12/2008
Publication Language
eng
Citation Key
8394
Shelkova, N. . (2008). Low-Wage Labor Markets and the Power of Suggestion. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01j38606940 (Original work published December 2008)
Working Papers
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Because it is differentiated from other employers, the U.S. military
enjoys some monopsony power. After reviewing existing estimates of the
elasticity of labor supplied to the military, we obtain new estimates for the Army
and Navy covering the period from 1998-2007. We employ a control function
approach to account for the potential endogeneity of enlistment incentives. Our
elasticity estimates of 2.4 for the Army and .4 for the Navy suggest that the
services have substantial wage-setting ability. However, the Army faces higher
supply elasticity since the invasion of Iraq and higher elasticity in states with
weak support for obligatory military service.

Year of Publication
2008
Number
537
Date Published
10/2008
Publication Language
eng
Citation Key
8109
Heaton, P. ., & Asch, B. . (2008). Monopsony and Labor Supply in the Army and Navy. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01bv73c041t (Original work published October 2008)
Working Papers
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This paper reports nonparametric estimates of the effect of labor supply
behavior on the payments to families enrolled in the Seattle/Denver Income
Maintenance Experiment. The randomized assignment of families to the
treatment groups in this experiment was designed to permit the calculation
of these nonparametric estimates. However, the nonparametric estimates
have never been reported, even though they are easy to construct using a
simple weighting procedure. Unfortunately, responses to the data
collection instrument (which depended on costly surveys) were not random,
and this opens up some ambiguity in the results.

Year of Publication
1990
Number
259
Date Published
01/1990
Publication Language
eng
Citation Key
Journal of Labor Economics, 1990 Vol. 8, No 1, January, 1990
Ashenfelter, O. ., & Plant, M. . (1990). Non-Parametric Estimates of the Labor Supply Effects of Negative Income Tax Programs. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01rv042t06t (Original work published January 1990)
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Year of Publication
2003
Number
473
Date Published
05/2003
Publication Language
eng
Citation Key
8190
Farber, H. . (2003). Is Tomorrow Another Day? The Labor Supply of New York City Cab Drivers. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01wd375w30d (Original work published May 2003)
Working Papers
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This paper considers estimation and testing of vector autoregression coefficients in panel data, and uses the techniques to analyze the dynamic
properties of wages and hours among American males. The model allows for non-
stationary individual effects, and is estimated by applying instrumental
variables to the quasi—differenced autoregressive equations. Particular
attention is paid to specifying lag lengths and forming convenient test
statistics. The empirical results suggest that the wage equation contains at
most a single lag of hours and wages, and that one cannot reject the hypothesis that lagged hours may be excluded from the wage equation. Our results
also show that lagged hours is important in the hours equation, which is
consistent with alternatives to the simple labor supply model that allow for
costly hours adjustment or preferences that are not time separable.

Year of Publication
1987
Number
222
Date Published
06/1987
Publication Language
eng
Citation Key
Econometrica, November 1988
Holtz-Eakin, D. ., Newey, W. ., & Rosen, H. . (1987). Wages and Hours: Estimating Vector Autoregressions with Panel Data. Retrieved from http://arks.princeton.edu/ark:/88435/dsp0105741r70t (Original work published June 1987)
Working Papers
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Tightly knit extended families, in which people often give money to and get money from
relatives, characterize many developing countries. These intra-family flows may mean that
public policies may affect a very different group of people than the one they targeted. To assess
the empirical importance of these effects, we study a cash pension program in South Africa that
targeted the elderly. We use the variation in pension receipt in three-generation households that
comes from differences in the age of the elder(s) in the households. We ﬁnd sharp drops in the
labor force participation of prime-age men in these households when the elder women reach 60
or elder men reach 65, the respective ages for pension eligibility. We also ﬁnd that the drop in
labor supply diminishes with family size, as the pension money is split over more people, and
with educational attainment, as the pension money becomes less signiﬁcant relative to outside
earnings. Other ﬁndings suggest that power within the family might play an important role:
(1) labor supply drops less when the pension is received by a man rather than by a woman; (2)
middle aged men (those more likely to have control in the family) reduce labor supply more than
younger men in the family; and (3) female labor supply is unaffected. These last two ﬁndings
also respectively suggest that the results are unlikely to be driven by increased human capital
investment or by a need to stay home to care for the elderly. As a whole, the program seems to
have had large effects on a group—prime age men living with the old—quite different from the
ones it targeted—elderly men and women.

Year of Publication
1999
Number
422
Date Published
09/1999
Publication Language
eng
Citation Key
8204
Bertrand, M. ., Mullainathan, S. ., & Miller, D. . (1999). Public Policy and Extended Families: Evidence from South Africa. Retrieved from http://arks.princeton.edu/ark:/88435/dsp012z10wq22d (Original work published September 1999)
Working Papers
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The purpose of this paper is to summarize a certain line of work on
the interpretation of unemployment in the analysis of male labour supply
behavior. Specifically, this work investigates whether the data support
the null hypothesis that individuals experiencing unemployment are on a
labour supply function, and if the data do not support this hypothesis,
how might a researcher proceed in empirical work. The motivation for
doing this is two fold. First, what unemployment represents is an
intrinsically interesting question, and may have implications beyond
labour supply analysis in terms of macroeconomic theory. Second, if
unemployed workers are constrained in the sense that they are off their
individual labour supply functions, standard labour supply estimation
may involve a fundamental misspecification of the equation. However, it
should be emphasized that the purpose of this paper is to survey one
possible approach to this problem; the paper does not attempt to provide
a general survey on labour supply estimation or on constraints in the
labour market.

Year of Publication
1985
Number
195
Date Published
06/1985
Publication Language
eng
Citation Key
In Unemployment, Search and Labour Supply, ed. Richard Blundeall and Ian Walker (Cambridge, New York and Sydney:Cambridge University Press, 1986)
Ham, J. . (1985). On the Interpretation of Unemployment in Empirical Labour Supply Analysis. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01b8515n380 (Original work published June 1985)
Working Papers
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This paper uses longitudinal survey data to analyse the relationship between recent increases in individual
wage inequality, and individual and family earnings inequality. The analysis compares the implications
of a model of intertemporal family labor supply, to those of a model with no behavioral content. The
results imply that the fraction of family earnings variance attributable to permanent wage differences is
about 70 percent, and remained constant as the total variance of earnings increased during the 1980's.
The parameter estimates imply the intertemporal labor supply for males is zero, and for females is about
0.4. The net contribution of behavioral responses to increasing wage inequality reduced the level of
family earnings inequality by 14 percent.

Year of Publication
1994
Number
339
Date Published
12/1994
Publication Language
eng
Citation Key
8254
Hyslop, D. . (1994). The Covariance Structure of Intrafamily Earnings, Rising Inequality and Family Labor Supply. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01mk61rg94c (Original work published December 1994)
Working Papers
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Two approaches to estimation and testing of fixed effects models are
commonly found in the econometrics literature. The first involves variations on
instrumental variables. The second, a Minimum Chi-Square (MCS) procedure
introduced by Chamberlain, minimizes a quadratic form in the difference between
unrestricted regression coefficients and the restrictions implied by the fixed
effects model. This paper is concerned with the relationship between Three-Stage
Least Squares (3SLS) and MCS. A 3SLS equivalent of the MCS estimator is
presented and, in the usual case wherein the time varying error component has a
scalar covariance matrix, 3SLS is shown to simplify to the conventional
deviations from means estimator. Furthermore, the corresponding over-
identification test statistic is the degrees of freedom times the R2 from a
regression of residuals on all leads and lags of right hand side variables. The
relationship between MCS and some recently introduced efficient instrumental
variables procedures is also considered.
An empirical example from the literature on life-cycle labor supply is used
to illustrate properties of 3SLS procedures for panel data under alternative
assumptions regarding residual covariance. Estimated labor supply elasticities
and standard errors appear to be insensitive to these assumptions. In contrast,
the over-identification test statistics are found to be substantially smaller
when residuals are allowed to be intertemporally correlated and heteroscedastic.
At conventional levels of significance, however, even the smallest of the test
statistics leads to rejection of the over-identifying restrictions implicit in
the labor supply models.

Year of Publication
1989
Number
246
Date Published
01/1989
Publication Language
eng
Citation Key
Journal of Business & Economic Statistics, Vol. 9, No. 3, Jul.y, 1991
Angrist, J. ., & Newey, W. . (1989). Minimum Chi-Square and Three-Stage Least Squares in Fixed Effects Models. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01v979v305k (Original work published January 1989)
Working Papers