Advanced Search
MyIDEAS: Login

Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages Based on Urban Economic Theory

Contents:

Author Info

  • Stephen L. Ross

    (University of Connecticut)

  • Yves Zenou

    (Research Institute of Industrial Economics, Stockholm)

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.uconn.edu/working/2006-21.pdf
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2006-21.

as in new window
Length: 47 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:uct:uconnp:2006-21

Note: We would like to thank the editor, Richard Arnott, and two anonymous referees for very helpful comments. We are also grateful to Jeffrey Zax and Deborah Garvey as well as the participants of the 2004 SOLE conference for excellent comments. Yves Zenou thanks the Marianne and marcus Wallenberg Foundation for financial support.
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC

Related research

Keywords: Efficiency wage; leisure; urban unemployment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Brueckner, Jan & Zenou, Yves, 2000. "Space And Unemployment: The Labour-Market Effects Of Spatial Mismatch," CEPR Discussion Papers 2397, C.E.P.R. Discussion Papers.
  2. Harry J. Paarsch & Bruce S. Shearer, 1996. "Piece Rates, Fixed Wages, and Incentive Effects: Statistical Evidence from Payroll Records," CIRANO Working Papers 96s-31, CIRANO.
  3. Ross, Stephen L. & Zenou, Yves, 2008. "Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages based on Urban Economic Theory," CEPR Discussion Papers 6841, C.E.P.R. Discussion Papers.
  4. Giorgio Topa & Stephen Ross & Patrick Bayer, 2005. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Working Papers 05-23, Center for Economic Studies, U.S. Census Bureau.
  5. Smith, Tony E. & Zenou, Yves, 1997. "Dual Labor Markets, Urban Unemployment, and Multicentric Cities," Journal of Economic Theory, Elsevier, vol. 76(1), pages 185-214, September.
  6. Zivot, E & Startz, R & Nelson, C-R, 1997. "Valid Confidence Intervals and Inference in the Presence of Weak Instruments," Discussion Papers in Economics at the University of Washington 97-17, Department of Economics at the University of Washington.
  7. Ross, Stephen L. & Zenou, Yves, 2004. "Shirking, Commuting and Labor Market Outcomes," Working Paper Series 627, Research Institute of Industrial Economics.
  8. Zax, Jeffrey S., 1991. "Compensation for commutes in labor and housing markets," Journal of Urban Economics, Elsevier, vol. 30(2), pages 192-207, September.
  9. David Card & Jesse Rothstein, 2006. "Racial Segregation and the Black-White Test Score Gap," NBER Working Papers 12078, National Bureau of Economic Research, Inc.
  10. O'Regan, Katherine M. & Quigley, John M., 1996. "Spatial Effects upon Unemployment Outcomes: The Case of New Jersey Teenagers," Berkeley Program on Housing and Urban Policy, Working Paper Series qt5cn8m94b, Berkeley Program on Housing and Urban Policy.
  11. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, November.
  12. Horrace, William C. & Oaxaca, Ronald L., 2003. "New Wine in Old Bottles: A Sequential Estimation Technique for the LPM," IZA Discussion Papers 703, Institute for the Study of Labor (IZA).
  13. Allgulin, Magnus & Ellingsen, Tore, 1998. "Monitoring and Pay," Working Paper Series in Economics and Finance 245, Stockholm School of Economics, revised 22 Nov 1999.
  14. Zenou, Yves, 2002. "How do firms redline workers?," Journal of Urban Economics, Elsevier, vol. 52(3), pages 391-408, November.
  15. Deng, Yongheng & Ross, Stephen L. & Wachter, Susan M., 2003. "Racial differences in homeownership: the effect of residential location," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 517-556, September.
  16. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  17. Zenou, Yves & Smith, Tony E., 1995. "Efficiency wages, involuntary unemployment and urban spatial structure," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 547-573, August.
  18. Ross, Stephen L., 1998. "Racial Differences in Residential and Job Mobility: Evidence Concerning the Spatial Mismatch Hypothesis," Journal of Urban Economics, Elsevier, vol. 43(1), pages 112-135, January.
  19. Durlauf, Steven N., 2004. "Neighborhood effects," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 50, pages 2173-2242 Elsevier.
  20. Paul Chen & Per-Anders Edin, 2002. "Efficiency Wages and Industry Wage Differentials: A Comparison Across Methods of Pay," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 617-631, November.
  21. Weinberg, Bruce A., 2000. "Black Residential Centralization and the Spatial Mismatch Hypothesis," Journal of Urban Economics, Elsevier, vol. 48(1), pages 110-134, July.
  22. Marianne Baxter & Urban J. Jermann, 1999. "Household Production and the Excess Sensitivity of Consumption to Current Income," NBER Working Papers 7046, National Bureau of Economic Research, Inc.
  23. Lawrence F. Katz & Jeffrey R. Kling & Jeffrey B. Liebman, 2001. "Moving To Opportunity In Boston: Early Results Of A Randomized Mobility Experiment," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 607-654, May.
  24. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
  25. Zenou, Yves, 2006. "Efficiency wages and unemployment in cities: The case of high-relocation costs," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 49-71, January.
  26. Alan B. Krueger & Lawrence H. Summers, 1987. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  27. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," Working papers 2006-13, University of Connecticut, Department of Economics, revised Jan 2009.
  28. Madden, Janice Fanning, 1985. "Urban wage gradients: Empirical evidence," Journal of Urban Economics, Elsevier, vol. 18(3), pages 291-301, November.
  29. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  30. Ross, Stephen & Yinger, John, 1995. "Comparative static analysis of open urban models with a full labor market and suburban employment," Regional Science and Urban Economics, Elsevier, vol. 25(5), pages 575-605, October.
  31. Robert Gibbons & Lawrence F. Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  32. Topa, Giorgio, 1997. "Social Interactions, Local Spillovers and Unemployment," Working Papers 97-17, C.V. Starr Center for Applied Economics, New York University.
  33. Cutler, David M & Glaeser, Edward L, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 827-72, August.
  34. Zax, Jeffrey S. & Kain, John F., 1991. "Commutes, quits, and moves," Journal of Urban Economics, Elsevier, vol. 29(2), pages 153-165, March.
  35. Bruce A. Weinberg & Patricia B. Reagan & Jeffrey J. Yankow, 2004. "Do Neighborhoods Affect Hours Worked? Evidence from Longitudinal Data," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 891-924, October.
  36. Caroline Minter Hoxby, 1994. "Does Competition Among Public Schools Benefit Students and Taxpayers?," NBER Working Papers 4979, National Bureau of Economic Research, Inc.
  37. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  38. Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
  39. Timothy, Darren & Wheaton, William C., 2001. "Intra-Urban Wage Variation, Employment Location, and Commuting Times," Journal of Urban Economics, Elsevier, vol. 50(2), pages 338-366, September.
  40. Alan Manning, 2003. "The Real Thin Theory: Monopsony in Modern Labour Markets," CEP Discussion Papers dp0564, Centre for Economic Performance, LSE.
  41. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  42. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-91, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ross, Stephen L. & Zenou, Yves, 2008. "Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages Based on Urban Economic Theory," Working Paper Series 753, Research Institute of Industrial Economics.
  2. 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.
  3. 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.
  4. Homann, Malte & Jensen, Uwe, 2013. "Does better education cause higher income?," HWWI Research Papers 145, Hamburg Institute of International Economics (HWWI).
  5. Stephen L. Ross, 2009. "Social Interactions within Cities: Neighborhood Environments and Peer Relationships," Working papers 2009-31, University of Connecticut, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2006-21. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kasey Kniffin).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.