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Testing Intertemporal Substitution, Implicit Contracts, and Hours Restriction Models of the Labor Market Using Micro Data

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Author Info
John C. Ham
Kevin T. Reilly

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Abstract

We present new tests of three theories of the labor market: intertemporal substitution, hours restrictions, and implicit contracts. The intertemporal substitution test we implement is an exclusion test robust to many specification errors and we consistently reject this model. We model hours restrictions as part of an endogenous switching model. We compare the implicit probit equation to an unrestricted probit equation for unemployment and reject the hours restriction model. For the implicit contracts model, we estimate nonseparable within-period labor-supply and consumption equations. We test a cross-equation restriction of the model and cannot reject the implicit contracts model.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 92 (2002)
Issue (Month): 4 (September)
Pages: 905-927
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Handle: RePEc:aea:aecrev:v:92:y:2002:i:4:p:905-927

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Edgar Cudmore & John Whalley, 2003. "Regeneration, Labour Supply and the Welfare Costs of Taxes," NBER Working Papers 10138, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Henry S. Farber, 2004. "Reference-Dependent Preferences and Labor Supply: The Case of New York City Taxi Drivers," Working Papers 876, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  3. Loren Brandt & Dwayne Benjamin, 2002. "Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China," William Davidson Institute Working Papers Series 518, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  4. Pourpourides, Panayiotis M., 2007. "Implicit Contracts, Wages and Wage Inequality over the Business Cycle," Cardiff Economics Working Papers E2007/19, Cardiff University, Cardiff Business School, Economics Section, revised Oct 2007. [Downloadable!]
  5. Sonia Laszlo, 2003. "Education, Labour Supply and Market Development in Rural Peru," Development and Comp Systems 0312005, EconWPA. [Downloadable!]
  6. Vassilis A. Hajivassiliou & Yannis M. Ioannides, 1999. "Unemployment and Liquidity Constraints," Discussion Papers Series, Department of Economics, Tufts University 9925, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  7. Christian Calmès, 2003. "Poignée de main invisible et persistance des cycles économiques : une revue de la littérature," Working Papers 03-40, Bank of Canada. [Downloadable!]
  8. Dan Black & Natalia Kolesnikova & Lowell J. Taylor, 2007. "The labor supply of married women: why does it differ across U.S. cities?," Working Papers 2007-043, Federal Reserve Bank of St. Louis. [Downloadable!]
  9. Ali Choudhary & Paul Levine, 2006. "The 24/7 Society and Multiple Habits," Department of Economics Discussion Papers 0506, Department of Economics, University of Surrey. [Downloadable!]
  10. Reichling, Felix, 2006. "Optimal Unemployment Insurance in Labor Market Equilibrium when Workers can Self-Insure," MPRA Paper 5362, University Library of Munich, Germany, revised 16 Oct 2007. [Downloadable!]
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