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Social and Behavioral Sciences Commons™
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Full-Text Articles in Social and Behavioral Sciences
Social Interactions In Labor Supply, Andrew Grodner, Thomas J. Kniesner
Social Interactions In Labor Supply, Andrew Grodner, Thomas J. Kniesner
Center for Policy Research
Our research examines the effect of interdependence on estimation and interpretation of earnings/labor supply equations. We consider the cases of (1) a positive spillover from others’ labor supplied and (2) a need for conformity with others’ labor supplied. Qualitative and quantitative comparative statics results with a Stone-Geary utility function demonstrate how spillover effects increase labor supply uniformly. Alternatively, conformity effects move labor supplied toward the mean of the reference group so that, in the limit, labor supply becomes perfectly inelastic at the reference group average. When there are un-modeled exogenous social interactions, conventional wage elasticities are still relatively well estimated …
Labor Supply With Social Interactions: Econometric Estimates And Their Tax Policy Implications, Andrew Grodner, Thomas Kniesner
Labor Supply With Social Interactions: Econometric Estimates And Their Tax Policy Implications, Andrew Grodner, Thomas Kniesner
Center for Policy Research
Our research fleshes out econometric details of examining possible social interactions in labor supply. We look for a response of a person's hours worked to hours worked in the labor market reference group, which includes those with similar age, family structure, and location. We identify endogenous spillovers by instrumenting average hours worked in the reference group with hours worked in neighboring reference groups. Estimates of the canonical labor supply model indicate positive economically important spillovers for adult men. The estimated total wage elasticity of labor supply is 0.22, where 0.08 is the exogenous wage change effect and 0.14 is the …