Do hours restrictions matter? A discrete family labor supply model with endogenous wages and hours restrictions
AbstractThe labor supply of West German married and cohabiting couples is analyzed using a discrete choice model. Following van Soest (1995), the labor supply decision is based on a household utility function which is determined by the leisure of the two spouses and net household income. Furthermore, heterogeneity of preferences and the German tax and benefit system are taken into account. We extend the neoclassical labor supply model in two directions. First, we allow for endogenous wages and find that there exist substantial wage differences between part-time and full-time jobs. In view of the negative wage differentials of part-time jobs, the model with endogenous wages predicts lower part-time employment than the standard neoclassical model. Compared with the distribution of actual hours worked, the share of part-time jobs is highly underpredicted. In a second step, hours restrictions are accommodated, as a result of which the estimated wage elasticities of both spouses are substantially reduced. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 98-44.
Date of creation: 1998
Date of revision:
Find related papers by JEL classification:
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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