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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.

    ()
    (University of Connecticut)

  • Zenou, Yves

    ()
    (Stockholm University)

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 behavioral 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 labor 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2601.

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Length: 44 pages
Date of creation: Feb 2007
Date of revision:
Publication status: published in: Regional Science and Urban Economics, 2008, 38, 498-517
Handle: RePEc:iza:izadps:dp2601

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Keywords: urban unemployment; leisure; efficiency wage;

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Cited by:
  1. Jos van Ommeren & Eva Gutierrez-i-Puigarnau, 2009. "Are Workers with A Long Commute Less Productive? An Empirical Analysis of Absenteeism," Tinbergen Institute Discussion Papers 09-014/3, Tinbergen Institute.
  2. Ross, Stephen L. & Zenou, Yves, 2007. "Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages based on Urban Economic Theory," CEPR Discussion Papers 6128, C.E.P.R. Discussion Papers.
  3. Stephen L. Ross, 2009. "Social Interactions within Cities: Neighborhood Environments and Peer Relationships," Working papers 2009-31, University of Connecticut, Department of Economics.
  4. 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.
  5. 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.
  6. Homann, Malte & Jensen, Uwe, 2013. "Does better education cause higher income?," HWWI Research Papers 145, Hamburg Institute of International Economics (HWWI).
  7. 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.

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