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Intertemporal Labor Supply in the Presence of Long Term Contracts

Author

Listed:
  • John M. Abowd

    (University of Chicago)

  • David Card

    (Princeton University)

Abstract

The authors compare the implications of a symmetric information contracting model and a dynamic labor supply model for changes in earnings and hours. A simple test is whether earnings changes are more variable than hours changes, as predicted by the labor supply model, or less variable, as predicted by the contracting model. The authors apply this test to two longitudinal surveys of adult men and find that earnings are somewhat more variable than hours for men who never change employers. The estimates suggest that changes in earnings and hours not associated with survey measurement error occur at fixed wage rates.

Suggested Citation

  • John M. Abowd & David Card, 1984. "Intertemporal Labor Supply in the Presence of Long Term Contracts," Working Papers 546, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:166
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    Cited by:

    1. Rosen, Sherwin, 1985. "Implicit Contracts: A Survey," Journal of Economic Literature, American Economic Association, vol. 23(3), pages 1144-1175, September.
    2. Ashenfelter, Orley, 1984. "Macroeconomic analyses and microeconomic analyses of labor supply," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 117-156, January.
    3. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-445, March.
    4. Chou, Y.K., 2000. "Testing Alternative Models of Labor Supply. Evidence from Taxi-Drivers in Singapore," Department of Economics - Working Papers Series 768, The University of Melbourne.

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