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Free to choose? Differences in the hours determination of constrained and unconstrained workers

  • Mark L. Bryan

In surveys, large minorities of individuals typically report that they would like to change their weekly working hours at their current hourly wage. If this evidence reflects genuine constraints on choice of hours, the determinants of hours should differ between constrained and unconstrained groups. Controlling for selection by an extension of the Heckman two-step method to ordered selection and panel data, and using a sample of manual men, I find that unconstrained workers' hours are determined differently from those of constrained workers. I present evidence that local labour market conditions affect the hours of constrained but not of unconstrained workers. I also correct for the potential bias resulting from the use of observed hours to derive the hourly wage, by instrumenting it with its lagged value. The combination of ignoring hours constraints and assuming the derived hourly wage is exogenous imparts a downward bias to wage elasticity estimates. Copyright 2007 , Oxford University Press.

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Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 59 (2007)
Issue (Month): 2 (April)
Pages: 226-252

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Handle: RePEc:oup:oxecpp:v:59:y:2007:i:2:p:226-252
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  1. Vella, F. & Verbeek, M.J.C.M., 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Other publications TiSEM 5aad87bc-25d1-49bc-882b-c, Tilburg University, School of Economics and Management.
  2. Ham, John C, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 335-54, July.
  3. Shulamit Kahn & Kevin Lang, 1988. "The Effects of Hours Constraints on Labor Supply Estimates," NBER Working Papers 2647, National Bureau of Economic Research, Inc.
  4. Joseph Altonji, 1984. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Working Papers 562, Princeton University, Department of Economics, Industrial Relations Section..
  5. Joseph Altonji & Christina Paxson, 1985. "Job Characteristics and Hours of Work," Working Papers 578, Princeton University, Department of Economics, Industrial Relations Section..
  6. Stewart, Mark B & Swaffield, Joanna K, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
  7. Zabel, Jeffrey E., 1992. "Estimating fixed and random effects models with selectivity," Economics Letters, Elsevier, vol. 40(3), pages 269-272, November.
  8. Card, David, 1990. "Labor supply with a minimum hours threshold," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 33(1), pages 137-168, January.
  9. repec:ese:iserwp:2001-06 is not listed on IDEAS
  10. Moffitt, Robert A., 1999. "New developments in econometric methods for labor market analysis," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 24, pages 1367-1397 Elsevier.
  11. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
  12. René Böheim & Mark P. Taylor, 2004. "Actual and Preferred Working Hours," British Journal of Industrial Relations, London School of Economics, vol. 42(1), pages 149-166, 03.
  13. Stewart, Mark B & Swaffield, Joanna K, 1997. "Constraints on the Desired Hours of Work of British Men," Economic Journal, Royal Economic Society, vol. 107(441), pages 520-35, March.
  14. George J. Borjas, 1980. "The Relationship between Wages and Weekly Hours of Work: The Role of Division Bias," Journal of Human Resources, University of Wisconsin Press, vol. 15(3), pages 409-423.
  15. Vella, Francis & Verbeek, Marno, 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Journal of Econometrics, Elsevier, vol. 90(2), pages 239-263, June.
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