Labor Supply Behavior Research Articles

Why you Can’t Find a Taxi in the Rain and Other Labor Supply Lessons from Cab Drivers*

Abstract I replicate and extend the seminal work of Camerer et al. (“Labor Supply of New York City Cabdrivers: One Day at a Time,” Quarterly Journal of Economics, 112 [1997], 407–441), who find that the wage elasticity of daily hours of work for New York City taxi drivers is negative and conclude that their labor supply behavior is consistent with reference dependence. In contrast, my analysis of the complete record of all trips taken in NYC taxi cabs from 2009 to 2013 shows that drivers tend to respond positively to unanticipated as well as anticipated increases in earnings opportunities. Additionally, using a discrete choice stopping model, the probability of a shift ending is strongly positively related to hours worked but at best weakly related to income earned. I find substantial heterogeneity across drivers in their elasticities, but the estimated elasticities are generally positive and rarely substantially negative. I find that new drivers with smaller elasticities are more likely to exit the industry, whereas drivers who remain quickly learn to be better optimizers (have positive labor supply elasticities that grow with experience). These results are consistent with the neoclassical optimizing model of labor supply and suggest that consideration of gain-loss utility and income reference dependence is not an important factor in the daily labor supply decisions of taxi drivers.

Post-retirement labour supply in England

This paper uses data from the English Longitudinal Study of Ageing to investigate the determinants of post retirement labour supply behaviour amongst retired men in England. I find the hazard of unretirement is highest when an individual is in their mid-late 60s. Evidence suggests unretirement is more likely amongst individuals with a higher level of educational attainment, who have a spouse in the labour market and are in better health. I investigate the nature of unretirement jobs and find they tend to be part time and provide a non-trivial source of income.

Shifting Taxes from Labor to Consumption: More Employment and More Inequality

This paper investigates the effect of shifting taxes from labor income to consumption on labor supply and the distribution of income in Germany. We simulate stepwise increases in the value-added tax (VAT) rate, which are compensated by revenue-neutral reductions in income-related taxes. We differentiate between the personal income tax (PIT) and social security contributions (SSC). Based on a dual data base and a microsimulation model of household labor supply behavior, we find a regressive impact of such a tax shift in the short run. When accounting for labor supply adjustments, the adverse distributional impact persists for PIT reductions, while the overall effects on inequality and progressivity become lower when payroll taxes are reduced. This is partly due to increases in aggregate labor supply, resulting from higher work incentives.

Effects of Substitutability Between Mother's Child Care and Market Care Service on Life-Cycle Labor Supply and Fertility Behavior

Effects of Substitutability Between Mother's Child Care and Market Care Service on Life-Cycle Labor Supply and Fertility Behavior

Young people living as couples: How women's labour supply is adapting to the crisis. Spain as a case study

In this paper, we focus on the effects of the Great Recession on the decisions of young women regarding their labour supply. Considering the profound effect of the economic recession on the Spanish labour market, and in particular on the labour supply of young people, the focus of the empirical part of this paper is on Spain. Using EU-SILC 2007 and 2012 micro data for Spain, the labour supply models of women are estimated by age group, with a particular focus on the 20 to 29 and 30 to 39 age bands, in order to establish how young women living in couples exhibit different labour supply propensities according to their partner's labour market status. Correction is made for the non-random selection of women living in couples in the younger age groups. This first analytical step reveals a negative effect on the likelihood of forming a new household in the context of precarious employment conditions. Analytical results regarding the labour supply of women by age group confirmed a discouraging effect of young children on the labour supply of the youngest mothers, as well as a positive effect from being the owner of a house purchased under mortgage.The literature shows that different effects can be at work within the crisis: an added worker effect (AWE), which is countercyclical labour supply behaviour involving an increase in individual labour supply in response to transitory shocks in the partner's earnings, and a procyclical discouraged worker effect. The resulting estimations of the present study suggest an AWE in 2012 for young women living in couples. While in 2012 the discouragement effect was only prevalent for women over 40, in 2007 it was also prevalent among younger women. Women's higher propensity to enter the labour market when their partner becomes unemployed or is persistently unemployed, coupled with their likelihood to be inactive in the presence of young children, would suggest a need for labour market policies targeted towards young women. Childcare facilities could mitigate the latter effect and produce a more continuous work profile, avoiding the negative effects of work experience interruptions on labour supply during the female lifecycle.

The generational effect on pharmacists' labour supply

Objectives The purpose of this article was to explore the extent to which generational differences mediate pharmacists' labour supply functions, focusing on the conditions under which they provide professional services. Methods Three age groups were identified: younger than 40 years of age, 40–54 years old and 55 years or older. Identical labour supply functions were formulated and estimated, using ordinary least squares, for pharmacists in the three groups depicting the number of hours worked per week as a function of their wage rate, human capital stock and job-related preferences. The data were obtained by surveying registered pharmacists in South Florida. Key findings Results indicated that as pharmacists approached retirement, their labour supply behaviour was conditioned more by institutional factors than by pay. The presence of children and the perception of stress exerted a stronger influence on the amount of labour supplied by younger than older pharmacists. Conversely, the effect of experience, gender, administrative role and perception of autonomy was stronger for older than for younger pharmacists. Conclusions These disparities may be useful to healthcare managers and policymakers as a means of understanding pharmacists' expectations and motives across generations while facilitating communication, promoting teamwork and setting up productivity goals.

United, Yet Apart? A Note on Persistent Labour Market Differences between Western and Eastern Germany

Comparing aggregate statistics and surveying selected empirical studies, this paper shows that the characteristics and results of labour markets in eastern and western Germany have become quite similar in some respects but still differ markedly in others even 25 years after unification. Whereas no substantial differences can be detected in firms' labour demand decisions and in employees' representation via works councils or trade unions, both parts of the country are somewhat apart concerning labour supply behaviour, labour productivity, wages, and bargaining coverage, and they still exhibit substantially different rates of unemployment. These differences may reflect observable and unobservable characteristics of economic actors as well as differences in behaviour, norms, and individuals' attitudes.

Marital Sorting, Inequality and the Role of Female Labor Supply: Evidence from East and West Germany

This paper examines to what extent marital sorting affects cross-sectional earnings inequality in Germany over the past three decades, while explicitly taking into account labor supply choices. Using rich micro data, the observed distribution of couples' earnings is compared to a counterfactual of randomly matched spouses. Hypothetical earnings are predicted based on a structural model of household labor supply. For West Germany, a positive effect of marital sorting on inequality is found after adjusting for labor supply behavior, while the effect is limited when earnings are taken as given. This means that there is positive sorting in earnings potential which is veiled by relatively low female labor force participation. In East Germany, the impact of marital sorting on inequality is highly disequalizing irrespective of adjusting for labor supply choices. This is mainly due to the fact that East German women are much more attached to the labor market.

Collective Labour Supply, Taxes, and Intrahousehold Allocation: An Empirical Approach

Most empirical studies of the impact of labour income taxation on the labour supply behaviour of households use a unitary modelling approach. In this paper we empirically analyze income taxation and the choice of working hours by combining the collective approach for household behaviour and the discrete hours choice framework with fixed costs of work. We identify the sharing rule parameters with data on working hours of both the husband and the wife within a couple. Parameter estimates are used to evaluate various model outcomes, like the wage elasticities of labour supply and the impacts of wage changes on the intrahousehold allocation of income. We also simulate the consequences of a policy change in the tax system. We find that the collective model has different empirical outcomes of income sharing than a restricted model that imposes income pooling. In particular, a specification with income pooling fails to capture asymmetries in the income sharing across spouses. These differences in outcomes have consequences for the evaluation of policy changes in the tax system and shed light on the effectiveness of certain policies.

Kinky choices, dictators and split might: a non-cooperative model for household consumption and labor supply

Abstract We model consumption and labor supply behavior of a couple in a non-cooperative setting. Using minimal assumptions, we prove that demand for public goods is characterized by three regimes. It is either determined by the preferences of one of the partners only (Husband Dictatorship or Wife Dictatorship), or by both spouses’ preferences, in which case each partner’s influence depends on the relative wage rates (Split Might). The model is illustrated empirically using a sample drawn from the Consumer Expenditure Survey (CEX) where expenditures on children’s goods are a public good in both spouses’ preferences. It turns out that the spending pattern reflects the husband’s preferences in about 54% of the couples in our sample. Still, in about 45% of the households, the wife acts as a dictator. Somewhat less than 1% of the couples is characterized by a split might regime. JEL-classification D11; D12; D13.

Adjusted EPOP as an Indicator of Labor Market Strength

As a measure of labor market strength, the raw Employment-to-Population ratio ( EPOP ) confounds employment outcomes with labor supply behavior. Movement in the EPOP depends on the relative movements of the employment rate (one minus the unemployment rate) and the labor force participation rate. This paper proposes an adjustment to the calculation of the EPOP , using individual micro data to account for both individual characteristics and the probability of labor force participation, which can be used to assess the strength of the labor market. The adjusted EPOP confirms what we already knew—that the stagnation of the EPOP since the end of the Great Recession is the result of continued declines in the labor force participation rate. Stripping the EPOP of confounding changes in labor supply we uncover a story that is more consistent with movements in the unemployment rate—the adjusted EPOP has regained its prerecession level of nearly 63 percent. Youth have regained even more, and those 25 to 54 regained 71 percent of their loss over the sample period. Of course, there remains the issue of declining labor force participation, which is a legitimate but different concern than whether the labor market is providing enough jobs.

Impact of Health on Labour Supply and Wages

In an agrarian economy economic impact of illness acts not only through out of pocket expenditure, but also through loss of labour time and wages at the individual level. Using the information collected from 676 respondents at selected villages in West Bengal from 2009 to 2010, the present paper examines the impact of health on labour supply behaviour and wages. Theoretically the study borrows the idea of nutrition-based efficiency wage hypothesis and builds a conceptual framework based on capability approach. The methodology follows a household production function model. Nutritional dimension of health as indicated by body mass index (BMI) has been found to have a positive and significant impact on labour supply for both the male and female respondents. Age is found to have significantly non-linear impact on labour supply. Hence, public policies to improve the sex and age composition of the households through appropriate channels, that is, health and fertility may be necessary. Finally, the results suggest a revision in the design of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) programme by integrating it with other developmental programmes on health, sanitation and skill development in order to ensure productivity of rural manual labourers. Experience of some other countries like South Africa and Brazil suggests the need to integrate public works programmes with programmes that target health and family welfare issues particularly in the context of rural livelihood.

Intertemporal substitution in maternal labor supply: Evidence using state school entrance age laws

Using exogenous variation in maternal net earning opportunities, generated through school entrance age of children, I study intertemporal labor supply behavior among married mothers. Employing data from the 1980 US Census and the NLSY, I estimate the effect of a one year delay in school attendance on long run maternal labor supply. IV estimates imply that having a 5year old enrolled in school increases labor supply for married women. Further, using a sample of 7 to 10year olds from the NLSY, I investigate persistence in employment outcomes for a married mother whose child delayed school entry. Results point towards long run intertemporal substitution in labor supply. Rough calculations yield an uncompensated wage elasticity of 0.37 and an intertemporal elasticity of substitution equal to 0.73.

Multiple job holding and income mobility in Indonesia

Indonesia, one of the fastest growing economies in Asia, has lifted a significant portion of its population out of poverty and has experienced improved living standards over the past decade. However, this occurred within a context of growing inequality as indicated by a segmented labour market between standard and non-standard employment. This study examines the relationship between income mobility and non-standard employment using multiple job holding as a case study. Our empirical analysis based on the Indonesia Family Life Survey (IFLS) shows that multiple job holding is a prominent feature of Indonesia's labour market. However, for a significant bulk of the pluriactive workers, multiple job holding seems to be a necessary labour supply behaviour to make ends meet. Moreover, the data do not provide sufficient evidence that pluriactivity in the country is strongly correlated with long-term income mobility. This seems to be in contrast to findings from developed countries indicating that multiple job holding can be used to improve one's mobility prospects. We conclude that further investigation is needed to determine whether multiple job holding in Indonesia is correlated with other dimensions of social mobility.

Beyond Inequality Accounting: Marital Sorting and Couple Labor Supply

This paper examines to what extent non-random sorting of spouses affects earnings inequality while explicitly disentangling effects from increasing assortativeness in couple formation from changing patterns of couples' labor supply behavior. Using German micro data, earnings distributions of observed and randomly matched couples are compared to each other. Earnings of hypothetical couples are adjusted for changes in hours worked given the differences in the household context using predictions based on a structural model of labor supply. The main finding is that the impact of marital sorting on earnings inequality has been underestimated in previous approaches. Predicting hours worked for hypothetical couples reveals a strong disequalizing impact of nonrandom sorting on inequality which is stable since the 1980s. Taking labor supply choices as given would suggest a smaller effect. This suggests that increasing earnings correlation among couples is to a considerable extent driven by changing patterns of labor market behavior rather than changes in the assortativeness in couple formation.

Culture, Religiosity and Female Labor Supply

Does culture affect female labor supply? In this paper, we address this question using a recent approach to measuring the effects of culture on economic outcomes, i.e. the epidemiological approach. We focus on migrants, who come from different cultures, but who share a common economic and institutional set-up today. Controlling for various individual characteristics including parental human capital as well as for current economic and institutional setup, we find that female employment rates in 1970 in a female migrant’s province of origin affects her labor supply behavior in 2008. We also show that it is the female employment rates and not male in the province of origin in 1970 that affects the current labor supply behavior. We also extend the epidemiological approach to analyze the effects of religion on female labor supply. More specifically, we use a proxy of parental religiosity, i.e. share of party votes in 1973 elections in Turkey to study female labor supply in 2008. Our findings indicate that female migrants from provinces that had larger (smaller) shares of the religious party votes in 1973 are less (more) likely to participate in the labor market in 2008. An extended model where both cultural and religiosity proxies are included shows that culture and religiosity have separately significant effects on female labor supply behavior.

Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength

As a measure of labor market strength, the raw employment-to-population ratio (EPOP) confounds employment outcomes with labor supply behavior. Movement in the EPOP depends on the relative movements of the employment rate (one minus the unemployment rate) and the labor force participation rate. This paper proposes an adjustment to the calculation of the EPOP using individual microdata to account for both individual characteristics and the probability of labor force participation, which can used to assess the strength of the labor market.

The optimal top marginal tax rate: Application to Hungary

The paper applies recent developments in the theory of optimal income taxation to the Hungarian personal income tax system. The main conclusion is that the optimal top marginal tax rate in Hungary is likely to be higher, perhaps substantially, than the actual rate. It is discussed how this result depends on the parameters describing labor-supply behavior, the income distribution, and the redistributive preferences of society.

Ethnicity as a mediator of pharmacists' labour supply

Objective Explore the extent to which ethnic identification is associated with the way in which pharmacists respond to determinants of the number of hours worked (i.e. labour supplied). Methods Separate labour supply functions were estimated for non-Hispanic white, black and Hispanic pharmacists in South Florida. The labour supply determinants included in the equations were the wage rate, human capital variables (age, academic degree, gender and number of children) and job-related preferences (practice site, satisfaction with the profession, workload, stress, advancement opportunities and flexibility). Key findings The empirical results showed that all coefficients in the non-Hispanic white equations were statistically significant, but several coefficients in the black and Hispanic equations lacked significance. Even in those instances in which the coefficients were significant for one or both minority groups, cultural differences were manifested in the direction and/or magnitude of impact of the covariates. Conclusions The findings suggest that minorities in the pharmacist workforce may deviate from dominant standards established by the nonminority group. The labour supply behaviour of minorities seemed to be associated with institutional factors that hinder the observed effects of the wage rate from conforming to expectations.

Revisiting Women's Labor Force Participation in Catalonia (1920–36)

This study aims to reconstruct women's activity rates in the fourteen leading textile areas of Catalonia, which represented 20 percent of the Catalan textile labor force in the first third of the twentieth century. This contribution proposes to review explanations offered by neoclassical labor economics with regard to the determinants of women's labor participation. It assumes that some of these hypotheses stem from the frequent under reporting of women's activity, particularly those who are married with children. Nominative linkage techniques have been used to correct the underregistration of women's activity in the Enumerator Books with information from the Labor Census from each village. Descriptive as well as analytical statistics provide new estimates of women's activity rates for those villages and fresh interpretations on the labor supply behavior of women through the life cycle.