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Non-Wage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females

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  • Vella, Francis

Abstract

This paper examines the estimation of a simultaneous model of hours and wages. We argue the relationship between weekly hours worked and the hourly wage is due to increasing marginal tax rates. As the total wage increases, due to increasing hours, employers and employees avoid taxation by substituting wages with non-taxable non-wage benefits. This is attentuated by labor legislation entitling employees to employer provided benefits. We estimate a wage that is independent of any benefit effect and employ it in the labor supply functions. An estimator is presented for the wage/hours market locus and the structural labor supply function. An application to the data examined Moffitt (1984) supports the validity of the procedure. A second application reveals that a previous study which concluded that the labor supply function of young females is downward sloping is misleading.

Suggested Citation

  • Vella, Francis, "undated". "Non-Wage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females," Department of Econometrics and Business Statistics Working Papers 267067, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:ags:monebs:267067
    DOI: 10.22004/ag.econ.267067
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    1. is not listed on IDEAS
    2. 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.
    3. repec:diw:diwwpp:dp2024 is not listed on IDEAS
    4. 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.
    5. 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.
    6. Gutknecht, Daniel, "undated". "Do Reservation Wages Decline Monotonically? A Novel Statistical Test," Economic Research Papers 270635, University of Warwick - Department of Economics.
    7. 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.
    8. Gutknecht, Daniel, 2016. "Testing for monotonicity under endogeneity," Journal of Econometrics, Elsevier, vol. 190(1), pages 100-114.
    9. 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.
    10. repec:eee:labchp:v:3:y:1999:i:pc:p:3143-3259 is not listed on IDEAS
    11. 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.
    12. 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.
    13. Schrenker, Annekatrin, 2023. "Do women expect wage cuts for part-time work?," Labour Economics, Elsevier, vol. 80(C).
    14. Schrenker, Annekatrin, 2023. "Do women expect wage cuts for part-time work?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 80, pages 1-23.
    15. 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.
    16. 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.
    17. repec:wrk:warwec:991 is not listed on IDEAS

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