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Labor Supply Elasticities: Overcoming Nonclassical Measurement Error Using More Accurate Hours Data

Author

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  • Barrett, Garry F.

    () (University of Sydney)

  • Hamermesh, Daniel S.

    () (Barnard College)

Abstract

We measure the impact of measurement error in labor-supply elasticities estimated over recalled usual work hours, as is ubiquitous in the literature. Employing hours of work in diaries collected by the American Time Use Survey, 2003-12, along with the same respondents' recalled usual hours, we show that the latter yield elasticities that are positively biased. We argue that this bias arises from the salience on recalled hours of differences in wage rates.

Suggested Citation

  • Barrett, Garry F. & Hamermesh, Daniel S., 2016. "Labor Supply Elasticities: Overcoming Nonclassical Measurement Error Using More Accurate Hours Data," IZA Discussion Papers 10404, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10404
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    References listed on IDEAS

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    1. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2012. "Married with Children: A Collective Labor Supply Model with Detailed Time Use and Intrahousehold Expenditure Information," American Economic Review, American Economic Association, vol. 102(7), pages 3377-3405, December.
    2. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    3. Juster, F Thomas & Stafford, Frank P, 1991. "The Allocation of Time: Empirical Findings, Behavioral Models, and Problems of Measurement," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 471-522, June.
    4. Olivier Bargain & Kristian Orsini & Andreas Peichl, 2014. "Comparing Labor Supply Elasticities in Europe and the United States: New Results," Journal of Human Resources, University of Wisconsin Press, vol. 49(3), pages 723-838.
    5. Tess M. Stafford, 2015. "What Do Fishermen Tell Us That Taxi Drivers Do Not? An Empirical Investigation of Labor Supply," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 683-710.
    6. Eric French, 2004. "The Labor Supply Response to (Mismeasured but) Predictable Wage Changes," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 602-613, May.
    7. George A. Akerlof & Janet L. Yellen, 1985. "Unemployment Through the Filter of Memory," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 747-773.
    8. Duncan, Greg J & Hill, Daniel H, 1985. "An Investigation of the Extent and Consequences of Measurement Error in Labor-Economic Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 508-532, October.
    9. 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.
    10. Daniel S. Hamermesh & Harley Frazis & Jay Stewart, 2005. "Data Watch: The American Time Use Survey," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 221-232, Winter.
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    More about this item

    Keywords

    time use; measurement error; labor supply;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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