On the Covariance Structure of Earnings and Hours Changes
This paper presents an empirical analysis of individual earnings and hours data from three different longitudinal surveys. In the first part of the paper, the authors catalog the main features of the covariance structure of earnings and hours changes. In the second part of the paper, they offer an interpretation of this model in terms of a simple life-cycle, labor-supply model. On the assumption that they can identify individual productivity growth with the shared component of earnings and hours variation, the authors obtain estimates of the intertemporal substitution elasticity. The results are not favorable to the life-cycle model: most of the covariation of earnings occurs at fixed hourly wage rates. Copyright 1989 by The Econometric Society.
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Volume (Year): 57 (1989)
Issue (Month): 2 (March)
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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.:
- J. A. Hausman, 1976.
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- John M. Abowd & Orley C. Ashenfelter, 1981.
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- Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May.
- John Abowd & David Card, 1984. "Intertemporal Substitution in the Presence of Long Term Contracts," Working Papers 546, Princeton University, Department of Economics, Industrial Relations Section..
- MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
- Oliver D. Hart, 1983. "Optimal Labour Contracts under Asymmetric Information: An Introduction," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 3-35.
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