Identifying Interdependent Behavior in an Empirical Model of Labor Supply
AbstractIn this paper we test a particular form of interdependent behavior, namely the hypothesis that individuals´ choices of hours of work are influenced by the average hours of work in a social reference group. There are problems to empirically disentangle the effects of interdependent behavior and preference variation across groups. We show that panel data or data from several points in time are needed. In the empirical analysis we combine cross-section data from 1973, 1980 and 1990. Our results support the hypothesis of interdependent behavior. The implication is that conventional tax policy predictions, in which preference interdependencies are neglected, will tend to underestimate the effect of a tax reform on hours of work. Our point estimates suggest that conventional calculations would capture only about a third of the actual change in hours of work.
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Bibliographic InfoPaper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 147.
Length: 26 pages
Date of creation: 28 Oct 1998
Date of revision:
Publication status: Published in Journal of Applied Econometrics, 1999, pages 607-626.
Labor supply; interdependent preferences; nonlinear taxes;
Other versions of this item:
- Aronsson, Thomas & Blomquist, Soren & Sacklen, Hans, 1999. "Identifying Interdependent Behaviour in an Empirical Model of Labour Supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(6), pages 607-26, Nov.-Dec..
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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