The Intertemporal-Substitution Hypothesis is Alive and Well ( But Hiding in the Data)
AbstractAccording to the intertemporal-substitution hypothesis, which underlies the typical empirical real business cycle model, cyclical fluctuations in employment and hours of work are optimizing labor-supply responses to short-run aggregate demand shifts. We demonstrate that previous empirical labor-supply research has used inappropriate data to test the intertemporal-substitution hypothesis. We estimate a fixed-effects life-cycle labor-supply model with more informative data, the triannual micro data of the Survey of Income and Program Participation. We find economy-wide wage elasticities of employment and hours worked per employee of +1.55 and +0.51, which support the intertemporal-substitution hypothesis and give econometric credibility to the labor-market specification of empirical real business cycle models.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Indiana - Center for Econometric Model Research in its series Papers with number 93-014.
Length: 19 pages
Date of creation: 1993
Date of revision:
Contact details of provider:
Postal: Indiana University, Center for Econometric Model Research, Department of Economics; Bloomington, IN 47405.
Web page: http://www.indiana.edu/~econweb/
More information through EDIRC
business cycles ; labour supply;
Other versions of this item:
- Jean Kimmel, 1993. "The Intertemporal-Substitution Hypothesis is Alive and Well (But Hiding in the Data)," Upjohn Working Papers and Journal Articles 93-19, W.E. Upjohn Institute for Employment Research.
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
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.:
- Cho, Jang-Ok & Cooley, Thomas F., 1994.
"Employment and hours over the business cycle,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 18(2), pages 411-432, March.
- Altug, Sumru & Miller, Robert A, 1990.
"Household Choices in Equilibrium,"
Econometric Society, vol. 58(3), pages 543-70, May.
- Sumru Altug & Robert Miller, . "Household Choices in Equilibrium," University of Chicago - Population Research Center 87-8, Chicago - Population Research Center.
- Sumru Altug & Robert A. Miller, 1987. "Household choices in equilibrium," Working Papers 341, Federal Reserve Bank of Minneapolis.
- 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.
- Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1986. "A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty," NBER Working Papers 1981, National Bureau of Economic Research, Inc.
- Kniesner, Thomas J & Goldsmith, Arthur H, 1987. "A Survey of Alternative Models of the Aggregate U.S. Labor Market," Journal of Economic Literature, American Economic Association, vol. 25(3), pages 1241-80, September.
- David Card, 1991.
"Intertemporal Labor Supply: An Assessment,"
NBER Working Papers
3602, National Bureau of Economic Research, Inc.
- Orley Ashenfelter, 1977.
"Unemployment as Disequilibrium in a Model of Aggregate Labor Supply,"
484, Princeton University, Department of Economics, Industrial Relations Section..
- Ashenfelter, Orley, 1980. "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply," Econometrica, Econometric Society, vol. 48(3), pages 547-64, April.
- Hotz, V Joseph & Kydland, Finn E & Sedlacek, Guilherme L, 1988. "Intertemporal Preferences and Labor Supply," Econometrica, Econometric Society, vol. 56(2), pages 335-60, March.
- 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.
- John Bound & Charles Brown & Greg J. Duncan & Willard L Rodgers, 1989. "Measurement Error In Cross-Sectional and Longitudinal Labor Market Surveys: Results From Two Validation Studies," NBER Working Papers 2884, National Bureau of Economic Research, Inc.
- repec:fth:prinin:269 is not listed on IDEAS
- Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12.
- Heckman, James, 1984. "Comments on the Ashenfelter and Kydland papers," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 209-224, January.
- Kennan, John, 1988. "An Econometric Analysis of Fluctuations in Aggregate Labor Supply and Demand," Econometrica, Econometric Society, vol. 56(2), pages 317-33, March.
- Mroz, Thomas A, 1987.
"The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions,"
Econometric Society, vol. 55(4), pages 765-99, July.
- Thomas Mroz, . "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," University of Chicago - Population Research Center 84-8, Chicago - Population Research Center.
- N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1982.
"Intertemporal Substitution in Macroeconomics,"
NBER Working Papers
0898, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Joseph Altonji, 1984. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Working Papers 562, Princeton University, Department of Economics, Industrial Relations Section..
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.