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Labor Supply Preferences, Hours Constraints, and Hours-Wage Tradeoffs

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Joseph G. Altonji
Christina H. Paxson

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Abstract

In a labor market in which firms offer tied hours-wage packages and there is substantial dispersion in the wage offers associated with a particular type of job, the best job available to a worker at a point in time may pay well but require an hours level which is far from the worker's labor supply schedule, or pay poorly but offer desirable hours. Intuitively, one would expect hours constraints to influence the pattern of wage-hours tradeoffs which occur when workers quit to new jobs. Constrained workers may be willing to sacrifice wage gains for better hours. Likewise, workers may accept jobs offering undesirable hours only if the associated wage gains are large. We investigate this issue empirically by examining whether overemployment (underemployment) on the initial job increases (reduces) the partial effect on the wage gain of a positive change in hours for those who quit. We also examine whether overemployment (underemployment) on the new job increases (reduces) the partial effect on the wage gain of a positive change in hours for those who quit. Despite the limitations imposed by small sample sizes and lack of information on the magnitude of hours constraints, our results support the view that an individual requires compensation to work in jobs which, given the individual's particular preferences, offer unattractive hours.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2121.

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Date of creation: Jan 1987
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Publication status: published as Journal of Labor Economics, vol. 6, no. 2, pp 254-276, April 1988. Journal of Human Resources, 27 no.2 (Spring 1992): 256-278
Handle: RePEc:nbr:nberwo:2121

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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. Moffitt, Robert, 1984. "The Estimation of a Joint Wage-Hours Labor Supply Model," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 550-66, October. [Downloadable!] (restricted)
  2. Biddle, J.E. & Zarkin, G.A., 1989. "Choice Among Wage-Hours Packages: An Ampirical Investigation Of Labour Supply," Papers 8809, Michigan State - Econometrics and Economic Theory.
  3. John C. Ham, 1979. "Rationing and the Supply of Labor: An Econometric Approach," Working Papers 483, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  4. Shelly J. Lundberg, 1984. "Tied Wage-Hours Offers and the Endogeneity of Wages," NBER Working Papers 1431, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February. [Downloadable!] (restricted)
  6. Ann P. Bartel, 1980. "Wages, Nonwage Job Characteristics, and Labor Mobility," NBER Working Papers 0552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Barzel, Yoram, 1973. "The Determination of Daily Hours and Wages," The Quarterly Journal of Economics, MIT Press, vol. 87(2), pages 220-38, May. [Downloadable!] (restricted)
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