Coordinated labor Supply within the Firm: Evidence and Implications

This paper studies individual and plant-wide adjustment in days worked. Matched firm-worker data for North-East Italy show signicant variation in mean days worked per month within plants: a one-standard deviation change amounts to about four days of worker per month. The paper then looks within the plant to document the extent of co-movement, or coordination, of labor supply among a plant's workers. After adjusting for individual and plant-specic effects, we find that the days worked of one's co-workers accounts for 20 percent of the variation in individual days worked. The effect of co-workers trumps other standard controls, such as the worker's own (daily) wage. It has been known that such an incentive to coordinate labor input can lead to downwardly-biased estimates of the labor supply elasticity if the identifying variation is idiosyncratic to a worker. Reacting to this, we study the (intensive) labor supply elasticity within the context of a model in which workers' time inputs are complements in production. This model can be estimated via minimum distance, which recovers the technology and preference parameters consistent with the observed degree of coordination and intensive-margin adjustment.