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Nonwage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females

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  • Vella, Francis

Abstract

This article argues that the negative relationship between weekly hours worked and the gross hourly wage rate is due to the provision of fringe benefits. As the total weekly wage increases, employers and employees avoid taxation by substituting wages with nontaxable, nonwage benefits. The author produces a wage that incorporates the benefit effects and estimates the corresponding labor-supply elasticities. An estimator is presented for the wage/hours market locus and the structural labor-supply function. An empirical application indicates that an estimated negative labor-supply elasticity associated with the observed gross wage is reversed when the adjusted wage is employed. Copyright 1993 by University of Chicago Press.

Suggested Citation

  • Vella, Francis, 1993. "Nonwage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 704-723, October.
    • Handle: RePEc:ucp:jlabec:v:11:y:1993:i:4:p:704-23
    DOI: 10.1086/298312
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    Cited by:

    1. Annekatrin Schrenker, 2022. "Do Women Expect Wage Cuts for Part-time Work?," Discussion Papers of DIW Berlin 2024, DIW Berlin, German Institute for Economic Research.
    2. Matthew Gray, 2000. "The Effects of Unemployment on the Earnings of Young Australians," CEPR Discussion Papers 419, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    3. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2007. "Public sector pay and corruption: Measuring bribery from micro data," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 963-991, June.
    4. Kostas Mavromaras & Stephane Mahuteau & Kostas Mavromaras & Sue Richardson & Rong Zhu, 2017. "Public–Private Sector Wage Differentials in Australia," The Economic Record, The Economic Society of Australia, vol. 93, pages 105-121, June.
    5. Julie Moschion, 2013. "The Impact of Fertility on Mothers' Labour Supply in Australia: Evidence from Exogenous Variation in Family Size," The Economic Record, The Economic Society of Australia, vol. 89(286), pages 319-338, September.
    6. Lixin Cai & Amy Y. C. Liu, 2011. "Public–Private Sector Wage Gap in Australia: Variation along the Distribution," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 362-390, June.
    7. repec:wrk:warwec:991 is not listed on IDEAS
    8. David Collard & Michael Godwin & John Hudson, 2005. "The Provision of Company Benefits in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7-8), pages 1397-1421.
    9. David Collard & Michael Godwin & John Hudson, 2005. "The Provision of Company Benefits in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7‐8), pages 1397-1421, September.
    10. Gutknecht, Daniel, 2012. "Do Reservation Wages Decline Monotonically? A Novel Statistical Test," Economic Research Papers 270635, University of Warwick - Department of Economics.
    11. Gutknecht, Daniel, 2016. "Testing for monotonicity under endogeneity," Journal of Econometrics, Elsevier, vol. 190(1), pages 100-114.
    12. repec:eee:labchp:v:3:y:1999:i:pc:p:3143-3259 is not listed on IDEAS
    13. Lixin Cai & Amy Y.C. Liu, 2008. "Public-Private Wage Gap in Australia: Variation Along the Distribution," CEPR Discussion Papers 581, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    14. Daniel Gutknecht, 2013. "Testing for Monotonicity under Endogeneity An Application to the Reservation Wage Function," Economics Series Working Papers 673, University of Oxford, Department of Economics.
    15. Schrenker, Annekatrin, 2023. "Do women expect wage cuts for part-time work?," Labour Economics, Elsevier, vol. 80(C).

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