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The Effects of Hours Constraints on Labor Supply Estimates

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  • Shulamit Kahn
  • Kevin Lang

Abstract

Almost all labor supply models are estimated under the assumption that workers are free to choose their hours. However, theory, casual empiricism and survey data suggest that many workers are not free to vary the hours within a job. Consequently, labor supply estimates based on actual hours of work may be biased. Using Canadian data on desired hours of work, we find that using actual hours causes labor supply estimates to be biased upwards but the bias is small.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2647.

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Date of creation: Jul 1988
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Publication status: published as Review of Economics and Statistics, Vol. 73, no. 4 (1991): 605-611.
Handle: RePEc:nbr:nberwo:2647

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  1. Ball, Laurence, 1990. "Intertemporal Substitution and Constraints on Labor Supply: Evidence from Panel Data," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 28(4), pages 706-24, October.
  2. William T. Dickens & Shelly J. Lundberg, 1985. "Hours Restrictions and Labor Supply," NBER Working Papers 1638, National Bureau of Economic Research, Inc.
  3. Rosen, Sherwin, 1987. "The theory of equalizing differences," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 12, pages 641-692 Elsevier.
  4. Shelly J. Lundberg, 1984. "Tied Wage-Hours Offers and the Endogeneity of Wages," NBER Working Papers 1431, National Bureau of Economic Research, Inc.
  5. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(3), pages 376-414, July.
  6. Lang, Kevin, 1989. "Why was there mandatory retirement?," Journal of Public Economics, Elsevier, Elsevier, vol. 39(1), pages 127-136, June.
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