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Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labor Supply

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Author Info
Luigi Pistaferri (Stanford University and Center for Economic Policy Research)

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Abstract

In this article, I estimate how labor supply responds to anticipated wage growth, unanticipated wage growth, and wage risk using the 198993 panel section of the Bank of Italy Survey of Households' Income and Wealth (SHIW), which collects individual expectations of future wages. The use of subjective expectations has several advantages. First, they provide information on the evolution and riskiness of future wages that the econometrician may never hope to observe. Moreover, this avoids the need for specifying instruments for the growth rate of wages. Finally, forecast errors can be directly controlled for, thus avoiding inconsistency in short panels.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 21 (2003)
Issue (Month): 3 (July)
Pages: 729-728
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlabec:v:21:y:2003:i:3:p:729-728

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References listed on IDEAS
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. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June. [Downloadable!] (restricted)
    Other versions:
  2. Jappelli, Tullio & Pistaferri, Luigi, 2000. "Using subjective income expectations to test for excess sensitivity of consumption to predicted income growth," European Economic Review, Elsevier, vol. 44(2), pages 337-358, February. [Downloadable!] (restricted)
    Other versions:
  3. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May. [Downloadable!] (restricted)
  4. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November. [Downloadable!] (restricted)
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  5. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August. [Downloadable!] (restricted)
  6. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer. [Downloadable!] (restricted)
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  7. Casey B. Mulligan, . "The Intertemporal Substitution of Work--What Does the Evidence Say?," University of Chicago - Population Research Center 95-11, Chicago - Population Research Center.
  8. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December. [Downloadable!] (restricted)
  9. Casey B. Mulligan, . "Pecuniary and Nonpecuniary Incentives to Work in the U.S. During World War II," University of Chicago - Population Research Center 95-3, Chicago - Population Research Center.
  10. Bover, Olympia, 1989. "Estimating Intertemporal Labour Supply Elasticities Using Structural Models," Economic Journal, Royal Economic Society, vol. 99(398), pages 1026-39, December. [Downloadable!] (restricted)
  11. Bernheim, B Douglas & Levin, Lawrence, 1989. "Social Security and Personal Saving: An Analysis of Expectations," American Economic Review, American Economic Association, vol. 79(2), pages 97-102, May. [Downloadable!] (restricted)
  12. Francine D. Blau & Adam J. Grossberg, 1989. "Wage and Employment Uncertainty and the Labor Force Participation Decisions of Married Women," NBER Working Papers 3081, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Luigi Pistaferri, 2001. "Superior Information, Income Shocks, And The Permanent Income Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 465-476, August. [Downloadable!] (restricted)
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  14. Hamish Low, 1999. "Self-insurance and unemployment benefit in a life-cycle model of labour supply and savings," IFS Working Papers W99/24, Institute for Fiscal Studies. [Downloadable!]
  15. David Card, 1991. "Intertemporal Labor Supply: An Assessment," NBER Working Papers 3602, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
  17. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 721-54, Sept./Oct. [Downloadable!] (restricted)
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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. Glenn Rudebusch & Eric Swanson, 2008. "The bond premium in a DSGE model with long-run real and nominal risks," Working Paper Series 2008-31, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  2. Mark Bils & Yongsung Chang & Sun-Bin Kim, 2009. "Comparative Advantage and Unemployment," RCER Working Papers 547, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
    Other versions:
  3. Giamboni Luigi, 2004. "Do husbands’ and wives’ predictions irrationally diverge?," Departmental Working Papers 203, Tor Vergata University, CEIS. [Downloadable!]
  4. Nigel Key & Michael J. Roberts & Erik O'Donoghue, 2006. "Risk and farm operator labour supply," Applied Economics, Taylor and Francis Journals, vol. 38(5), pages 573-586, March. [Downloadable!] (restricted)
  5. Steven J. Haider & David S. Loughran, 2003. "How Important Are Wages to the Elderly? Evidence from the New Beneficiary Data System and the Social Security Earnings Test," Working Papers wp049, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  6. Low, Hamish & Meghir, Costas & Pistaferri, Luigi, 2008. "Wage Risk and Employment Risk over the Life Cycle," IZA Discussion Papers 3700, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Denis Conniffe & Donal O’Neill, 2008. "An Efficient Estimator for Dealing with Missing Data on Explanatory Variables in a Probit Choice Model," Economics, Finance and Accounting Department Working Paper Series n1960908.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  8. 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!]
  9. Morissette, René & Ostrovsky, Yuri, 2005. "The Instability of Family Earnings and Family Income in Canada, 1986 to 1991 and 1996 to 2001," Analytical Studies Branch Research Paper Series 2005265e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  10. Giamboni Luigi & Waldmann Robert, 2004. "A behavioral model of consumption," Departmental Working Papers 202, Tor Vergata University, CEIS. [Downloadable!]
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