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Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages based on Urban Economic Theory

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  • Ross, Stephen L.
  • Zenou, Yves

Abstract

Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioural substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labour market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6128.

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Date of creation: Feb 2007
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Handle: RePEc:cpr:ceprdp:6128

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Keywords: efficiency wage; leisure; urban unemployment;

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Citations

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Cited by:
  1. Tito Boeri & Marta De Philippis & Eleonora Patacchini & Michele Pellizzari, 2011. "Immigration, Housing Discrimination and Employment," Working Papers 390, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Ross, Stephen L. & Zenou, Yves, 2007. "Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages Based on Urban Economic Theory," IZA Discussion Papers 2601, Institute for the Study of Labor (IZA).
  3. Tito Boeri & Marta De Philippis & Eleonora Patacchini & Michele Pelizzari, 2010. "Moving to Segregation: Evidence from 8 Italian cities," EIEF Working Papers Series 1109, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2011.
  4. van Ommeren, Jos N. & Gutiérrez-i-Puigarnau, Eva, 2011. "Are workers with a long commute less productive? An empirical analysis of absenteeism," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 1-8, January.
  5. David Heres & Darby Jack & Deborah Salon, 2014. "Do public transport investments promote urban economic development? Evidence from bus rapid transit in Bogotá, Colombia," Transportation, Springer, vol. 41(1), pages 57-74, January.
  6. Stephen L. Ross, 2009. "Social Interactions within Cities: Neighborhood Environments and Peer Relationships," Working papers 2009-31, University of Connecticut, Department of Economics.
  7. Homann, Malte & Jensen, Uwe, 2013. "Does better education cause higher income?," HWWI Research Papers 145, Hamburg Institute of International Economics (HWWI).

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