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Intertemporal substitution and household production in labour supply

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  • Guillermo Felices
  • David Tinsley
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    Abstract

    The demands on a person's time vary over their working life, so that the years in which they might be expected to devote most time to work may also be the period when other commitments, such as bringing up children, are most pressing. Estimates of the intertemporal labour supply elasticity that do not take this possibility into account are likely to be biased. Recent research that uses US data from three time-use surveys has found evidence for a large downward bias to the labour supply elasticity. This paper uses a large UK survey to test this hypothesis. It finds convincing evidence for a similar downward bias in estimates of the UK labour supply elasticity for males. The analysis is extended by differentiating by sex, marital status, skill and business cycle. The bias appears in every case, but is less evident for married men. The labour supply elasticity for single women is, interestingly, similar to that for single men.

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    Bibliographic Info

    Paper provided by Bank of England in its series Bank of England working papers with number 234.

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    Date of creation: Oct 2004
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    Handle: RePEc:boe:boeewp:234

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    1. Eichenbaum, Martin S & Hansen, Lars Peter & Singleton, Kenneth J, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 51-78, February.
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