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Identifying Interdependent Behavior in an Empirical Model of Labor Supply

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Author Info
Aronsson, Thomas () (Department of Economics, Umeå University)
Blomquist, Sören () (Department of Economics, Uppsala University)
Sacklén, Hans (Trade Union Institute for Economic Research)
Abstract

In 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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Publisher Info
Paper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 147.

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Length: 26 pages
Date of creation: 28 Oct 1998
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Publication status: Published in Journal of Applied Econometrics, 1999, pages 607-626.
Handle: RePEc:hhs:fiefwp:0147

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Related research
Keywords: Labor supply; interdependent preferences; nonlinear taxes;

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Find related papers by JEL classification:
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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References listed on IDEAS
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.:
  1. Hausman, Jerry A., 1980. "The effect of wages, taxes, and fixed costs on women's labor force participation," Journal of Public Economics, Elsevier, vol. 14(2), pages 161-194, October. [Downloadable!] (restricted)
  2. Woittiez, Isolde & Kapteyn, Arie, 1998. "Social interactions and habit formation in a model of female labour supply," Journal of Public Economics, Elsevier, vol. 70(2), pages 185-205, November. [Downloadable!] (restricted)
  3. Blomquist, N. Soren, 1993. "Interdependent behavior and the effect of taxes," Journal of Public Economics, Elsevier, vol. 51(2), pages 211-218, June. [Downloadable!] (restricted)
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  4. Beach, Charles M & MacKinnon, James G, 1978. "A Maximum Likelihood Procedure for Regression with Autocorrelated Errors," Econometrica, Econometric Society, vol. 46(1), pages 51-58, January. [Downloadable!] (restricted)
  5. Andreoni, James & Scholz, John Karl, 1998. "An Econometric Analysis of Charitable Giving with Interdependent Preferences," Economic Inquiry, Oxford University Press, vol. 36(3), pages 410-28, July.
  6. Kapteyn, Arie, et al, 1997. "Interdependent Preferences: An Econometric Analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(6), pages 665-86, Nov.-Dec.. [Downloadable!]
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  7. Macurdy, T. & Green, D. & Paarsch, H., 1990. "Assessing Empirical Approaches For Analyzing Taxes And Labor Supply," Papers e-90-11, Stanford - Hoover Institution.
  8. Alessie, Rob & Kapteyn, Arie, 1991. "Habit Formation, Interdependent References and Demographic Effects in the Almost Ideal Demand System," Economic Journal, Royal Economic Society, vol. 101(406), pages 404-19, May. [Downloadable!] (restricted)
  9. Blomquist, N. Soren, 1983. "The effect of income taxation on the labor supply of married men in Sweden," Journal of Public Economics, Elsevier, vol. 22(2), pages 169-197, November. [Downloadable!] (restricted)
  10. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 531-42, July. [Downloadable!] (restricted)
  11. Jerry A. Hausman, 1980. "The effect of wages, taxes, and fixed costs on women's labor force participation," NBER Chapters, in: Econometric Studies in Public Finance, pages 161-194 National Bureau of Economic Research, Inc.
  12. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Ada Ferrer-i-Carbonell, 2002. "Income and Well-being," Tinbergen Institute Discussion Papers 02-019/3, Tinbergen Institute. [Downloadable!]
  2. Claude Montmarquette & François Gardes, 2002. "How Large is Your Reference Group," CIRANO Working Papers 2002s-87, CIRANO. [Downloadable!]
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  3. Bernard Fortin & Guy Lacroix & Marie-Claire Villeval, 2004. "Tax Evasion and Social Interactions," Cahiers de recherche 0432, CIRPEE. [Downloadable!]
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  4. Peter Kooreman & Adriaan R. Soetevent, 2007. "A discrete-choice model with social interactions: with an application to high school teen behavior," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 599-624. [Downloadable!]
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  5. Bernard Fortin & Nadia Joubert & Guy Lacroix, 2002. "Fiscalité, effets de voisinage et offre de travail au noir," Post-Print halshs-00178184_v1, HAL. [Downloadable!]
  6. Andrew Grodner & Thomas J. Kniesner, 2007. "Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications," IZA Discussion Papers 3034, Institute for the Study of Labor (IZA). [Downloadable!]
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  7. Andrew E. Clark & David Masclet & Marie-Claire Villeval, 2006. "Effort and comparison income: Survey and experimental evidence," PSE Working Papers 2006-03, PSE (Ecole normale supérieure). [Downloadable!]
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  8. Andrew E. Clark & Youenn Lohéac, 2005. ""It Wasn’t Me, It Was Them!" Social Influence in Risky Behavior by Adolescents," IZA Discussion Papers 1573, Institute for the Study of Labor (IZA). [Downloadable!]
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  9. Tovmo Per & Revelli Federico, 2006. "Declared vs. revealed yardstick competition: local government efficiency in Norway," Department of Economics Working Papers 200605, University of Turin. [Downloadable!]
  10. Andrew E. Clark & David Masclet & Marie-Claire Villeval, 2008. "Effort and Comparison Income: Experimental and Survey Evidence," CEP Discussion Papers dp0886, Centre for Economic Performance, LSE. [Downloadable!]
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