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Intertemporal Labor Supply and Involuntary Unemployment

Author

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  • Haan, Peter

    () (DIW Berlin)

  • Uhlendorff, Arne

    () (CREST)

Abstract

In this paper we develop a model to consistently estimate the intertemporal labor supply behavior on the extensive margin (participation decision) and the intensive margin (working hours decision). In this framework we distinguish between voluntary non-participation and involuntary unemployment which is caused by labor market rationing and model the dynamics of labor supply by accounting for true state dependence and unobserved effects. Our approach follows the empirical literature on life cycle employment based on approximate decision rules. However, in contrast to previous studies, this framework allows us to test for true state dependence of voluntary non-participation, involuntary unemployment, full-time work and over-time work. Moreover, we derive consistent estimates of intertemporal labor supply elasticities over time and asses the bias of short- and long-run elasticities derived in a pure choice model of labor supply.

Suggested Citation

  • Haan, Peter & Uhlendorff, Arne, 2007. "Intertemporal Labor Supply and Involuntary Unemployment," IZA Discussion Papers 2888, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2888
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Loeffler, Max & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian & Sommer, Eric, 2014. "Documentation IZA?MOD v3.0: The IZA Policy Simulation Model," IZA Discussion Papers 8553, Institute for the Study of Labor (IZA).
    2. Pacifico, Daniele, 2009. "Modelling Unobserved Heterogeneity in Discrete Choice Models of Labour Supply," MPRA Paper 19030, University Library of Munich, Germany.
    3. Akay, Alpaslan & Bargain, Olivier & Jara, Xavier, 2017. "'Fair' Welfare Comparisons with Heterogeneous Tastes: Subjective versus Revealed Preferences," IZA Discussion Papers 10908, Institute for the Study of Labor (IZA).
    4. Bargain, Olivier & Peichl, Andreas, 2013. "Steady-state labor supply elasticities: A survey," ZEW Discussion Papers 13-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Zucchelli, E. & Harris, M. & Zhao, X., 2012. "Ill-health and transitions to part-time work and self-employment among older workers," Health, Econometrics and Data Group (HEDG) Working Papers 12/04, HEDG, c/o Department of Economics, University of York.
    6. Peichl, Andreas & Schneider, Hilmar & Siegloch, Sebastian, 2010. "Documentation IZA?MOD: The IZA Policy SImulation MODel," IZA Discussion Papers 4865, Institute for the Study of Labor (IZA).
    7. Zhiyang Jia & Trine E. Vattø, 2016. "The path of labor supply adjustment. Sources of lagged responses to tax-benefit reforms," Discussion Papers 854, Statistics Norway, Research Department.

    More about this item

    Keywords

    state dependence; transitions on the labor market; intertemporal labor supply behavior; involuntary unemployment;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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