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Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications

  • Grodner, Andrew

    ()

    (East Carolina University)

  • Kniesner, Thomas J.

    ()

    (Claremont Graduate University)

Our econometric research allows for a possible response of a person's hours worked to hours typically worked by members of a multidimensional labor market reference group that considers demographics and geographic location. Instrumental variables estimates of the canonical labor supply model expanded to permit social interactions pass a battery of specification checks and indicate positive and economically important spillovers for adult men. Ignoring or incorrectly considering social interactions in male labor supply can mis-estimate the response to tax reform by as much as 60 percent.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3034.

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Length: 38 pages
Date of creation: Sep 2007
Date of revision:
Publication status: published in: Research in Labor Economics, 2008, 28, 1-23
Handle: RePEc:iza:izadps:dp3034
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