labor supply

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
Author
Abstract

This paper presents a survey of recent microeconometric studies of
the labor market, focusing on research that emphasizes the possible
failure of measured wage rates to separate individual supply and demand
decisions. On both the demand and supply sides of the labor market
there is evidence that forces from the other side of the market
influence employment outcomes through some mechanism other than the
wage. On the supply side, this evidence takes the form of correlations
between individual labor supply outcomes and market—level measures of
employment demand in the individual's local labor market. On the demand
side, it takes the form of correlations between firms’ employment decisions and measures of their employees‘ outside opportunities. Both sets
of findings are inconsistent with simple supply and demand models, and
suggest the need for alternative models of the labor market, which
permit an uncoupling of short-run employment decisions from wage rates.

Year of Publication
1987
Number
228
Date Published
11/1987
Publication Language
eng
Citation Key
8354
Card, D. (1987). Supply and Demand in the Labor Market. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01pz50gw11t (Original work published November 1987)
Working Papers
Author
Abstract

Reemployment bonus experiments offer large lump sum payments to
unemployment insurance (UI) recipients who find a job quickly. Such
experiments are underway or have been recently completed in four states. This
paper analyzes the results from Illinois and discusses the implications of the
experiments for theories of unemployment and policy design. I examine the
hazard rate of exit from unemployment and find that it is significantly higher
for the experimental groups, but only during the period of bonus eligibility.
Both labor supply and search theories of unemployment are shown to suggest a
rise in the reemployment hazard just before the end of bonus eligibility and
to suggest larger effects of the fixed amount bonus for lower income groups.
Only weak support is found for these hypotheses, which suggests limitations of
the models of unemployment. Some modifications of the models are suggested.
The experiments demonstrate the effects of economic incentives on job
finding behavior but they do not show the desirability of a permanent
reemployment bonus program. Evidence from another sample suggests that as
many as half of those who received a reemployment bonus returned to their
previous employer, so that a bonus program that pays people returning to their
last employer would provide a strong encouragement to temporary layoffs. A
discussion of UI claim filing behavior suggests that a permanent program could
well increase the frequency or promptness of filing, thus reducing any
financial advantages of a bonus program.

Year of Publication
1988
Number
242
Date Published
11/1988
Publication Language
eng
Citation Key
National Bureau of Economic Research No. 2783, December 1988.
Meyer, B. (1988). Implications of the Illinois Reemployment Bonus Experiments for Theories of Unemployment and Policy Design. Retrieved from http://arks.princeton.edu/ark:/88435/dsp011r66j113m (Original work published November 1988)
Working Papers
Abstract

According to the family utility function approach, the labor supply
functions of married men should differ according to whether or not their
wives also work. In this paper I explicitly model the switching nature
of labor supply while also accounting for the endogeneity of the labor
force participation decision of the wife, using an endogenous switching
regressions model based on the quadratic family utility function. The
model is estimated from a cross-section of 1210 married couples from the
Panel Study of Income Dynamics.

Year of Publication
1985
Number
191
Date Published
06/1985
Publication Language
eng
Citation Key
Journal of Labor Economics, Vol 5, No. 1, January 1987
Ransom, M. (1985). The Labor Supply of Married Men: A Switching Regressions Model. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01qr46r082b (Original work published June 1985)
Working Papers
Abstract

In a labor market in which firms offer tied hours-wage packages and
there is substantial dispersion in the wage offers associated with a
particular type of job, the best job available to a worker at a point in
time may pay well but require an hours level which is far from the worker's
labor supply schedule, or pay poorly but offer desirable hours.
Intuitively, one would expect hours constraints to influence the pattern of
wage-hours tradeoffs which occur when workers quit to new jobs. Constrained
workers may be willing to sacrifice wage gains for better hours. Likewise,
workers may accept jobs offering undesirable hours only if the associated
wage gains are large. We investigate this issue empirically by examining
whether overemployment (underemployment) on the initial job increases
(reduces) the partial effect on the wage gain of a positive change in hours
for those who quit. We also examine whether overemployment
(underemployment) on the new job increases (reduces) the partial effect on
the wage gain of a positive change in hours for those who quit. Despite the
limitations imposed by small sample sizes and lack of information on the
magnitude of hours constraints, our results support the view that an
individual requires compensation to work in jobs which, given the
individual’s particular preferences, offer unattractive hours.

Year of Publication
1987
Number
214
Date Published
01/1987
Publication Language
eng
Citation Key
Journal of Labor Economics, Vol. 6, No. 2, (April, 1988
Paxson, C., & Altonji, J. (1987). Labor Supply Preferences, Hours Constraints, and Hours-Wage Tradeoffs. Retrieved from http://arks.princeton.edu/ark:/88435/dsp015999n3374 (Original work published January 1987)
Working Papers
Abstract

If hours can be freely varied within jobs, the effect on hours of
changes in preferences for those who do change jobs should be similar to
the effect on hours for those who do not change jobs. Conversely, if
employers restrict hours choices, then changes in preferences should affect
hours more strongly when the job changes than when it does not change. For a
sample of married women we find that changes in many of the labor supply
preference variables produce much larger effects on hours when the job
changes.

Year of Publication
1990
Number
271
Date Published
09/1990
Publication Language
eng
Citation Key
The Journal of Human Resources, Vol. 27, No. 2, Spring, 1992
Paxson, C., & Altonji, J. (1990). Labor Supply, Hours Constraints and Job Mobility. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01ns0646039 (Original work published September 1990)
Working Papers
Abstract

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
Abstract

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
Abstract

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
Abstract

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)
Working Papers