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Labour Supply as a Buffer: Evidence from UK Households

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  • Benito, Andrew

    ()
    (Goldman Sachs)

  • Saleheen, Jumana

    ()
    (Bank of England)

Abstract

This paper examines labour supply adjustment – both hours worked and participation decisions. We focus on the response of each to financial shocks, employing data from the BHPS. Estimated responses are broadly consistent with models of self-insurance that incorporate labour supply flexibility. The shock reflects several factors including financial wealth and a partner's employment situation. The response is significantly larger for those who change job, consistent with the importance of hours constraints within jobs. The propensity to participate in the labour market also appears to respond to the financial shock but that is somewhat less robust than the hours response.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6506.

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Length: 36 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6506

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Keywords: labour supply; self-insurance;

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References

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  1. Andrew Benito, 2002. "Does Job Insecurity Affect Household Consumption?," Banco de Espa�a Working Papers, Banco de Espa�a 0225, Banco de Espa�a.
  2. Melvin Stephens Jr., 2001. "Worker Displacement and the Added Worker Effect," NBER Working Papers 8260, National Bureau of Economic Research, Inc.
  3. Andrew Benito, 2009. "Who Withdraws Housing Equity and Why?," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 76(301), pages 51-70, 02.
  4. Böheim, René & Taylor, Mark P., 2001. "Actual and preferred working hours," ISER Working Paper Series 2001-06, Institute for Social and Economic Research.
  5. Eric French, 2000. "The effects of health, wealth, and wages on labor supply and retirement behavior," Working Paper Series, Federal Reserve Bank of Chicago WP-00-2, Federal Reserve Bank of Chicago.
  6. Stewart, Mark B. & Swaffield, Joanna K., 2006. "The other margin : do minimum wages cause working hours adjustments for low-wage workers?," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 746, University of Warwick, Department of Economics.
  7. Stewart, Mark B & Swaffield, Joanna K, 1997. "Constraints on the Desired Hours of Work of British Men," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(441), pages 520-35, March.
  8. Benito, Andrew & Saleheen, Jumana, 2012. "Labour Supply as a Buffer: Evidence from UK Households," IZA Discussion Papers 6506, Institute for the Study of Labor (IZA).
  9. Andrew Henley, 2004. "House Price Shocks, Windfall Gains and Hours of Work: British Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 66(4), pages 439-456, 09.
  10. Richard Blundell & Mike Brewer & Marco Francesconi, 2008. "Job Changes and Hours Changes: Understanding the Path of Labor Supply Adjustment," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 26(3), pages 421-453, 07.
  11. Benito, Andrew & Mumtaz, Haroon, 2009. "Excess Sensitivity, Liquidity Constraints, And The Collateral Role Of Housing," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 13(03), pages 305-326, June.
  12. Andrew Benito, 2007. "Housing equity as a buffer: evidence from UK households," Bank of England working papers, Bank of England 324, Bank of England.
  13. Renata Bottazzi & Hamish Low & Matthew Wakefield, 2007. "Why do home owners work longer hours?," IFS Working Papers, Institute for Fiscal Studies W07/10, Institute for Fiscal Studies.
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Cited by:
  1. Benito, Andrew & Saleheen, Jumana, 2012. "Labour Supply as a Buffer: Evidence from UK Households," IZA Discussion Papers 6506, Institute for the Study of Labor (IZA).
  2. Bryan, Mark L. & Longhi, Simonetta, 2013. "Couples’ labour supply responses to job loss: boom and recession compared," ISER Working Paper Series 2013-20, Institute for Social and Economic Research.
  3. Bryan, Mark L. & Longhi, Simonetta, 2013. "Couples' Labour Supply Responses to Job Loss: Boom and Recession Compared," IZA Discussion Papers 7775, Institute for the Study of Labor (IZA).

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