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Coordinated labor Supply within the Firm: Evidence and Implications

  • Ryan Michaels

    (University of Rochester)

  • Michele Battisti

    (Ifo Institute at University of Munich)

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.

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File URL: https://economicdynamics.org/meetpapers/2013/paper_1116.pdf
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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 1116.

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Date of creation: 2013
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Handle: RePEc:red:sed013:1116
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Cingano, Federico, 2003. "Returns to specific skills in industrial districts," Labour Economics, Elsevier, vol. 10(2), pages 149-164, April.
  3. Dimitri G. Demekas, 1994. "Labor Market Institutions and Flexibility in Italy; A Critical Evaluation and Some International Comparisons," IMF Working Papers 94/30, International Monetary Fund.
  4. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
  5. Raj Chetty & John N. Friedman & Tore Olsen & Luigi Pistaferri, 2011. "Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 749-804.
  6. Russell Cooper & John Haltiwanger & Jonathan L. Willis, 2007. "Implications of Search Frictions: Matching Aggregate and Establishment-level Observations," NBER Working Papers 13115, National Bureau of Economic Research, Inc.
  7. Francesco Devicienti & Cristian Bartolucci, 2013. "Better Workers Move to Better Firms: A Simple Test to Identify Sorting," 2013 Meeting Papers 249, Society for Economic Dynamics.
  8. Christopher L. Erikson & Andrea Ichino, 1994. "Wage Differentials in Italy: Market Forces, Institutions, and Inflation," NBER Working Papers 4922, National Bureau of Economic Research, Inc.
  9. Cooper, Russell & Haltiwanger, John & Willis, Jonathan L., 2007. "Search frictions: Matching aggregate and establishment observations," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 56-78, September.
  10. Richard Rogerson, 2011. "Individual and Aggregate Labor Supply with Coordinated Working Times," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 7-37, 08.
  11. Giuseppe Tattara & Marco Valentini, 2010. "Turnover and Excess Worker Reallocation. The Veneto Labour Market between 1982 and 1996," LABOUR, CEIS, vol. 24(4), pages 474-500, December.
  12. Giannelli, Gianna Claudia & Braschi, Cristina, 2002. "Reducing Hours of Work: Does Overtime Act as a Brake Upon Employment Growth? An Analysis by Gender for the Case of Italy," IZA Discussion Papers 557, Institute for the Study of Labor (IZA).
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