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Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications

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  • Grodner, Andrew

    ()
    (East Carolina University)

  • Kniesner, Thomas J.

    ()
    (Syracuse University)

Abstract

Our econometric research allows for a possible response of a person's hours worked to hours typically worked by members of a multidimensional labor market reference group that considers demographics and geographic location. Instrumental variables estimates of the canonical labor supply model expanded to permit social interactions pass a battery of specification checks and indicate positive and economically important spillovers for adult men. Ignoring or incorrectly considering social interactions in male labor supply can mis-estimate the response to tax reform by as much as 60 percent.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3034.

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Length: 38 pages
Date of creation: Sep 2007
Date of revision:
Publication status: published in: Research in Labor Economics, 2008, 28, 1-23
Handle: RePEc:iza:izadps:dp3034

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Keywords: labor supply; instrumental variables; reference group; social interactions; social multiplier; PSID;

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Cited by:
  1. Grodner, Andrew & Kniesner, Thomas J. & Bishop, John A., 2011. "Social Interactions in the Labor Market," IZA Discussion Papers 5934, Institute for the Study of Labor (IZA).
  2. Fabrice Etilé, 2007. "Social norms, ideal body weight and food attitudes," Health Economics, John Wiley & Sons, Ltd., vol. 16(9), pages 945-966.
  3. Eric Maurin & Julie Moschion, 2006. "The social multiplier and labour market participation of mothers," Cahiers de la Maison des Sciences Economiques v06044, Université Panthéon-Sorbonne (Paris 1).
  4. Bruce A. Weinberg, 2007. "Social Interactions with Endogenous Associations," NBER Working Papers 13038, National Bureau of Economic Research, Inc.

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