Labour supply with habit formation

Kubin, Ingrid; Prinz, Aloys

doi:10.1016/s0165-1765(01)00595-x

Cited by 14 publications

(8 citation statements)

References 6 publications

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“…The above formulation is sufficiently general so as to allow dependencies between an individual's past and current labor supply decisions due to habit formation in labor supply behavior (Bover, 1991;Kubin and Prinz, 2002;Woittiez and Kapteyn, 1998), wage based rewards for human capital accumulated via labor market experience (Altug and Miller, 1998;Eckstein and Wolpin, 1989;Imai and Keane, 2004;Wolpin, 1992) and job search costs (Heckman and MaCurdy, 1980;Hyslop, 1999). Habit formation gives rise to non-separabilities in the utility function, while accumulation of human capital and job search costs imply non-separabilities in the budget constraint.…”

Section: A Dynamic Multi-state Labor Supply Modelmentioning

confidence: 99%

Modeling Employment Dynamics With State Dependence and Unobserved Heterogeneity

Prowse

2012

Journal of Business & Economic Statistics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. The results reveal significant autocorrelation in unobservables, and significant variation in the effects of children and education on labor supply preferences. Moreover, omission of random coeffcients or autocorrelation can bias significantly estimates of policy effects. On average, policies temporarily incentivizing part-time and full-time employment are equally effective tools for reducing non-employment. However, non-employment among women with young children is more responsive to policies encouraging part-time rather than full-time work.JEL Classification: C15, C25, J6, J22

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Section: A Dynamic Multi-state Labor Supply Modelmentioning

confidence: 99%

Modeling Employment Dynamics With State Dependence and Unobserved Heterogeneity

Prowse

2012

Journal of Business & Economic Statistics

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“…The work of economists on habit formation has focused on a variety of aspects but largely ignored repercussions on labour market behaviour. 1 Notable exceptions are contributions on labour supply, which usually adopt an individual perspective, often assume a given wage and consider habit concerns with regard to leisure or working hours (Bover, 1991;Faria & León-Ledesma, 2004;Kubin & Prinz, 2002;Vendrik, 1998Vendrik, , 2003Woittiez & Kapteyn, 1998). The relative neglect of labour demand is surprising because there is ample evidence that habit formation does not only occur with respect to leisure or working hours but, more importantly from our perspective, concerning wages (Clark, 1999;Clark, Masclet, & Villeval, 2010;Diriwaechter & Shvartsman, 2018;Grund & Sliwka, 2007).…”

Section: Motivationmentioning

confidence: 99%

Habit formation and wage determination

Goerke

2020

Manage Decis Econ

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We analyse the implications of habit formation relating to wages in a multiperiod efficiency‐wage model. If employees have such preferences, their existence provides firms with incentives to raise wages and reduce employment over time. Greater intensity does not necessarily have the same consequences, because wage adjustments counteract the initial level impact. The firm's response additionally depends on the wage dependency of dismissal costs, because such costs make an increasing wage profile over time more attractive and mitigate the effects of greater intensity of habit formation. We further show that short‐lived productivity shocks have long‐lasting wage and employment consequences. Moreover, habit concerns by firm owners reduce wages.

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“…The above formulation is sufficiently general to allow dependencies between an individual's past and current labor supply decisions due to habit formation in labor supply behavior (Bover, 1991;Kubin and Prinz, 2002;Woittiez and Kapteyn, 1998), wage based rewards for human capital accumulated via labor market experience (Altug and Miller, 1998;Eckstein and Wolpin, 1989;Imai and Keane, 2004;Wolpin, 1992) and job search costs (Heckman and MaCurdy, 1980;Hyslop, 1999). Job search costs generate dependencies between labor supply choices in consecutive years, while habit formation and the accumulation of human capital have the potential to create dependencies in labor supply behavior spanning several years.…”

Section: A Dynamic Multi-state Labor Supply Modelmentioning

confidence: 99%

Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity

Prowse

2011

SSRN Journal

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We extend existing work on the dynamics of labor force participation by distinguishing between full-time and part-time employment and by allowing unobserved heterogeneity in the effects of previous employment outcomes, children and education on labor supply behavior. In addition, unobserved heterogeneity may feature autocorrelation and correlated random effects. Our results reveal significant variation in the effects of children and education on labor supply behavior. Moreover, the omission of random coefficients and autocorrelation biases estimates of state dependencies. On average, temporary shocks that increase the rate of part-time employment lead subsequently to lower rates of non-employment than do shocks that temporarily increase the rate of full-time work.

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Labour supply with habit formation

Cited by 14 publications

References 6 publications

Modeling Employment Dynamics With State Dependence and Unobserved Heterogeneity

Modeling Employment Dynamics With State Dependence and Unobserved Heterogeneity

Habit formation and wage determination

Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity

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