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The Impact of the Market and the Family on Youth Employment and Labor Supply

  • Alan L. Gustman
  • Thomas L. Steinmeier

This paper analyzes the school enrollment and labor supply decisions of teenagers and young adults as jointly deter-mined outcomes. The empirical results are based on an application of discrete multivariate analysis to a sample taken from the Survey of Income and Education. Higher relative wage offers are found to reduce the probability of a youth enrolling in school and to increase labor supply. However, the estimated impacts are very sensitive to adjustments made for the possibility that wage rate offers by firms are higher for full-time than for part-timework. Job availability, as measured by the local youth unemployment rate, has its strongest effect on the probability of enrollment and full-time labor force participation for nonwhite males, accounting, in the extreme, for a difference in this probability of almost 50 percent. Since a wage measure is included as an independent variable, we can be sure that the job availability measure is not acting as a surrogate for an absent wage variable, but instead has an impact of its own. Specific findings on the influence of various family and market characteristics are compared to those from earlier studies.

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File URL: http://www.nber.org/papers/w0415.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0415.

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Date of creation: Dec 1979
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Publication status: published as Gustman, Alan L. and Steinmeier, Thomas L. "The Impact of Wages and Unemployment on Youth Enrollment and Labor Supply." The Review of Economics and Statistics, Vol. LXIII, No. 4, (November 1981), pp. 553- 560.
Handle: RePEc:nbr:nberwo:0415
Note: LS
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  1. Parsons, Donald O, 1974. "The Cost of School Time, Foregone Earnings, and Human Capital Formation," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 251-66, Part I, M.
  2. Reuben Gronau, 1976. "Leisure, Home Production and Work--The Theory of The Allocation of Time Revisited," NBER Working Papers 0137, National Bureau of Economic Research, Inc.
  3. Gustman, Alan L, 1973. "On the Appropriate Model for Analyzing Investment in Human Capital Where the Capital Market is Imperfect," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 19(3), pages 303-05, September.
  4. Edward Lazear, 1977. "Schooling as a Wage Depressant," Journal of Human Resources, University of Wisconsin Press, vol. 12(2), pages 164-176.
  5. Edward P. Lazear, 1975. "Schooling as a Wage Depressant," NBER Working Papers 0092, National Bureau of Economic Research, Inc.
  6. Albert Rees & Wayne Gray, 1982. "Family Effects in Youth Employment," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 453-474 National Bureau of Economic Research, Inc.
  7. Welch, Finis, 1974. "Minimum Wage Legislation in the United States," Economic Inquiry, Western Economic Association International, vol. 12(3), pages 285-318, September.
  8. Robert E. Hall, 1970. "Why Is the Unemployment Rate So High at Full Employment?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 369-410.
  9. Rosen, Harvey S, 1976. "Taxes in a Labor Supply Model with Joint Wage-Hours Determination," Econometrica, Econometric Society, vol. 44(3), pages 485-507, May.
  10. Samuel A. Rea Jr., 1974. "Unemployment and the Supply of Labor," Journal of Human Resources, University of Wisconsin Press, vol. 9(2), pages 279-289.
  11. Arnold Katz, 1973. "Teenage Employment Effects of State Minimum Wages," Journal of Human Resources, University of Wisconsin Press, vol. 8(2), pages 250-256.
  12. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  13. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
  14. Gustman, Alan L & Stafford, Frank P, 1972. "Income Expectations and the Consumption of Graduate Students," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1246-58, Nov.-Dec..
  15. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
  16. Robert I. Lerman, 1972. "Some Determinants of Youth School Activity," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 366-383.
  17. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
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