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Free to choose? Differences in the hours determination of constrained and unconstrained workers

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  • Bryan, Mark L.

Abstract

In individual surveys, large minorities of individuals typically report that they would like to change their weekly working hours at their current hourly wage. If this evidence reflects genuine constraints on individuals’ choice of hours, the determinants of hours should differ between constrained and unconstrained groups. Controlling for selection by an extension of the Heckman two-step method to ordered selection and panel data, and using a sample of manual men, I find that unconstrained workers’ hours are determined differently from those of constrained workers. I present evidence that local labour market conditions affect the hours of constrained but not of unconstrained workers. I also correct for the potential bias resulting from the use of observed hours to derive the hourly wage, by instrumenting it with its lagged value. The combination of ignoring hours constraints and assuming the derived hourly wage is exogenous imparts a large downward bias to estimates of the wage elasticity. I estimate the corrected uncompensated elasticity to be -0.1.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2002-28.

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Date of creation: 01 Dec 2002
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Publication status: published
Handle: RePEc:ese:iserwp:2002-28

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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  1. Moffitt, Robert A., 1999. "New developments in econometric methods for labor market analysis," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 24, pages 1367-1397 Elsevier.
  2. Kahn, Shulamit & Lang, Kevin, 1991. "The Effect of Hours Constraints on Labor Supply Estimates," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 605-11, November.
  3. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages S176-S215, June.
  4. Stewart, Mark B & Swaffield, Joanna K, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
  5. Stewart, Mark B & Swaffield, Joanna K, 1997. "Constraints on the Desired Hours of Work of British Men," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(441), pages 520-35, March.
  6. David Card, 1990. "Labor Supply with a Minimum Hours Threshold," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 642, Princeton University, Department of Economics, Industrial Relations Section..
  7. Zabel, Jeffrey E., 1992. "Estimating fixed and random effects models with selectivity," Economics Letters, Elsevier, Elsevier, vol. 40(3), pages 269-272, November.
  8. Vella, Francis & Verbeek, Marno, 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Journal of Econometrics, Elsevier, Elsevier, vol. 90(2), pages 239-263, June.
  9. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 115-132, July.
  10. Joseph Altonji & Christina Paxson, 1985. "Job Characteristics and Hours of Work," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 578, Princeton University, Department of Economics, Industrial Relations Section..
  11. George J. Borjas, 1980. "The Relationship between Wages and Weekly Hours of Work: The Role of Division Bias," Journal of Human Resources, University of Wisconsin Press, vol. 15(3), pages 409-423.
  12. repec:ese:iserwp:2001-06 is not listed on IDEAS
  13. repec:fth:prinin:262 is not listed on IDEAS
  14. René Böheim & Mark P. Taylor, 2004. "Actual and Preferred Working Hours," British Journal of Industrial Relations, London School of Economics, vol. 42(1), pages 149-166, 03.
  15. Ham, John C, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(3), pages 335-54, July.
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Cited by:
  1. Gielen, Anne C., 2007. "Working Hours Flexibility and Older Workers' Labor Supply," IZA Discussion Papers 2946, Institute for the Study of Labor (IZA).
  2. Catherine SMITH, 2014. "Did the Intergenerational Solidarity Pact increase the employment rate of the elderly in Belgium? A macro-econometric evaluation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2014009, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Blundell, Richard & Brewer, Mike & Francesconi, Marco, 2007. "Job Changes and Hours Changes: Understanding the Path of Labour Supply Adjustment," IZA Discussion Papers 3044, Institute for the Study of Labor (IZA).
  4. Heineck, Guido & Schwarze, Johannes, 2004. "Fly Me to the Moon: The Determinants of Secondary Jobholding in Germany and the UK," IZA Discussion Papers 1358, Institute for the Study of Labor (IZA).
  5. KURODA Sachiko & YAMAMOTO Isamu, 2011. "Firm's demand for work hours: Evidence from multi-country and matched firm-worker data," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 11024, Research Institute of Economy, Trade and Industry (RIETI).

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