Working Paper: CEPR ID: DP17068
Authors: Alexander Bick; Adam Blandin; Richard Rogerson
Abstract: We document two robust features of the cross-sectional distribution of usualweekly hours and hourly wages. First, usual weekly hours are heavilyconcentrated around 40 hours, while at the same time a substantial share oftotal hours come from individuals who work more than 50 hours. Second, meanhourly wages are non-monotonic across the usual hours distribution, with apeak at 50 hours. We develop and estimate a model of labor supply to accountfor these features. The novel feature of our model is that earnings arenon-linear in hours, with the extent of nonlinearity varying over the hoursdistribution. Our estimates imply significant wage penalties for individualsthat deviate from 40 hours in either direction, leading to a large mass ofindividuals that work 40 hours and are not very responsive to shocks. Thishas important implications for the role of labor supply as a mechanism forself-insurance in a standard heterogeneous agent-incomplete markets modeland for empirical strategies designed to estimate labor supply parameters.
Keywords: No keywords provided
JEL Codes: D31; E24; H31; J22; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| hours worked (J22) | labor supply elasticity (J20) |
| hours worked (J22) | mean hourly wages (J31) |
| mean hourly wages (J31) | hours worked (J22) |
| hours worked (J22) | productivity (O49) |
| productivity (O49) | hours worked (J22) |
| hours worked (J22) | wage penalty (J31) |
| hours worked (J22) | kink in earnings function (J31) |