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Labour supply as a buffer: evidence from UK households


  • Benito, Andrew

    () (Bank of England)

  • Saleheen, Jumana

    () (Bank of England)


This paper examines labour supply adjustment – both hours worked and participation decisions. The analysis focuses on the response of each to financial shocks, employing data from the British Household Panel Survey. Results suggest that employees whose financial situation deteriorates relative to what they expected, increase their labour supply in response. That response is consistent with models of self-insurance that incorporate labour supply flexibility. The shock reflects several factors including financial wealth and a partner’s employment situation. The response is significantly larger for those who change job, consistent with the importance of hours constraints within jobs. The propensity to participate in the labour market also appears to respond to the financial shock but that is somewhat less robust than the hours response.

Suggested Citation

  • Benito, Andrew & Saleheen, Jumana, 2011. "Labour supply as a buffer: evidence from UK households," Bank of England working papers 426, Bank of England.
  • Handle: RePEc:boe:boeewp:0426

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    References listed on IDEAS

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    Cited by:

    1. van Huizen, Thomas, 2014. "More wealth, shorter hours? Evidence from the Netherlands," Economics Letters, Elsevier, vol. 125(2), pages 323-326.
    2. Andrew Benito & Jumana Saleheen, 2013. "Labour Supply as a Buffer: Evidence from UK Households," Economica, London School of Economics and Political Science, vol. 80(320), pages 698-720, October.
    3. Rossi, Mariacristina & Trucchi, Serena, 2016. "Liquidity constraints and labor supply," European Economic Review, Elsevier, vol. 87(C), pages 176-193.
    4. Bryan, Mark L. & Longhi, Simonetta, 2013. "Couples' Labour Supply Responses to Job Loss: Boom and Recession Compared," IZA Discussion Papers 7775, Institute for the Study of Labor (IZA).
    5. Bryan, Mark L. & Longhi, Simonetta, 2013. "Couples’ labour supply responses to job loss: boom and recession compared," ISER Working Paper Series 2013-20, Institute for Social and Economic Research.

    More about this item


    Labour supply; self-insurance.;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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