work hours wages and vacation leave using the panel study of income dynamics the authors provide a set of facts about vacation leave they show that on average vacation time taken rises one to one with paid vacation annual hours worked fall by about one full time week with every week of paid vacation the amount by which vacation time taken exceeds time paid is highest for women union members and government workers paid vacation weeks are positively associated with hourly wage rates and to a lesser extent with nonwage compensation and vacation time taken is weakly countercyclical vacation leave seems to be determined by broad employer policy rather than by negotiation between the worker and the firm in particular it is strongly related to seniority but depends very little on labor market experience and for job changers it is only weakly related to vacation on the previous job

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

implicit contracts life cycle labor supply and intertemporal substitution the implicit contract model is a serious alternative to the spot market interpretation of the labor market however its usefulness has been limited because the wage is unobserved and hence it has not been possible to estimate an intertemporal frisch supply elasticity for the model using microdata in this article we show that one can estimate this elasticity from microdata within the context of the implicit contract model under relatively weak assumptions based on consumer theory we implement our approach on two micro data sets and for both obtain a reasonably precise elasticity estimate of approximately 1 0

are unemployment and out of the labor force behaviorally distinct labor force states this paper tests the hypothesis that the classifications unemployed and out of the labor force are behaviorally meaningless distinctions this hypothesis is rejected distinct behavioral equations govern transitions from out of the labor force to employment and from unemployment to employment the evidence reported in this paper is broadly consistent with versions of search theory in which unemployment is a state that facilitates the job search process in an appendix we demonstrate that log concavity of the wage offer distribution implies that the exit rate from unemployment is an increasing function of the rate of arrival of job offers

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

allocation inflexibilities female labor supply and housing assets accumulation are women working to pay the mortgage this article uses data from the 1986 canadian family expenditures survey to estimate a life cycle consistent model of household labor supply and commodity demand that incorporates a mortgage qualification constraint based on earnings both the parametric and nonparametric implications of the model suggest that the labor supply of a nontrivial percentage of married women is constrained by mortgage commitments the results of generalized selectivity models of female labor force participation and labor supply show that the positive effect of a high debt service ratio exceeds the negative effect of young children

sampling variability some observations from a labour supply equation in economics the number of observations available for empirical work is often predetermined researchers assume some large sample distribution and carry through with measurement and testing applied to data sets of varying sizes the consequences of sampling variability are generally ignored it is shown in a re sampling experiment using data sets of different sizes and estimating log linear male labour supply equations that a wide range of what appears to be statistically supported estimates of the wage elasticity of labour supply are generated testing based on bootstrapped estimates shows that 4000 observations are required to reduce sampling variability to statistically acceptable levels

can first mover and early mover advantages be sustained in an industry with low barriers to entry imitation this study examines whether first mover and early mover advantages can be sustained in an industry where the barriers to entry are generally low and new product innovations can be easily imitated namely the money market mutual fund industry using a simultaneous equation supply and demand model of panel data from a variety of money market fund product categories the study finds that first movers and early movers enjoy both a highly sustainable pricing advantage and a moderately sustainable market share advantage these counterintuitive results are interpreted in terms of the structural characteristics of demand in the industry implications of these results for the ongoing debate between the sustainability and hypercompetition perspectives are discussed 1998 john wiley sons ltd

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

testing between competing models of real business cycles this paper tests a real business cycle model with efficient long term labor contracts the efficient long term contract model against a standard real business cycle model the intertemporal substitution model in the former model employment and real wages are determined by bilateral dynamic bargaining between firms and workers in the latter model employment and real wages are determined instead by the dynamic optimization of households within the competitive market framework we estimate each model using aggregate japanese data our results show that the data are consistent with the efficient long term contract model but are inconsistent with the intertemporal substitution model a business cycle phenomenon is typically found in time series data on employment and real wages according to the data of almost all developed countries employment fluctuations are considerably greater than wage fluctuations many recent economic studies have attempted to explain this phenomenon most of these studies fall into the equilibrium business cycle theory in which business cycles are the result of individual agents optimizing in a competitive environment among the most famous early examples of such a theory are the rational expectations general equilibrium models of lucas 1972 and barro 1976 which stress the role of nominal shocks in the presence of imperfect information more recently the predominant equilibrium business cycle theory has been the real business cycle model of kydland and prescott 1982 long and plosser 1983 and king and plosser 1984 which emphasizes the importance of real shocks to production technology real business cycle theory considers a model economy populated by a single infinitely lived individual with given initial resources production possibilities and tastes the representative individual chooses a preferred consumption production plan and the resulting allocation is pareto optimal the implications of real business cycle theory are thus derived from the pareto optimal equilibrium allocation as calculated from the planning problem of a social planner or representative agent a policy implication of this theory is that monetary policy has no significant effect

unemployment and female labour supply the definition of labour force participation in the standard labour supply model stands in sharp contrast to that used in compiling the labour force statistics in the labour supply models only those supplying positive hours of work are considered to be labour force participants on the other hand participation in the labour force statistics is often defined to include not only those supplying positive hours but also those actively searching for work this paper is an attempt to reconcile these concepts by allowing unemployed workers to enter a generalisation of the standard labour supply model this turns out to be a convenient way to enter demand side factors directly into the determination of an individual s labour market position the model is applied with some success to the working behaviour of married women in the uk family expenditure survey

finite sample bias in iv estimation of intertemporal labor supply models is the intertemporal substitution elasticity really small the empirical literature on intertemporal labor supply behavior documents that the intertemporal elasticity of substitution of labor supply is very low with a plausible range of zero to 0 2 drawing upon the literature on the distribution of instrumental variables iv estimators this paper demonstrates that this conventional wisdom is erroneous because it does not take into account the severe finite sample bias in these estimates that arise from weak instruments this paper adopts several approaches to adjust for the problems induced by these weak instruments the empirical results show that when uncorrected for finite sample bias the two stage least squares 2sls estimate of the elasticity is essentially zero as in most of the previous studies with its valid confidence interval being open ended however when corrected for finite sample bias the estimate becomes approximately 0 5 with a much tighter confidence interval

the intertemporal substitution model of labour market fluctuations an empirical analysis the paper uses two approaches to study whether aggregate fluctuations in employment and unemployment may be explained within a market clearing framework as intertemporal substitution in labour supply first log linear equations for labour supply and unemployment are estimated using a forecasting model to measure wage and price expectations second a utility function is used to derive and estimate an equation for labour supply as a function of the current real wage and consumption the influence of expected future real wages and interest rates is captured by the consumption variable the empirical results do not support the intertemporal substitution model

unemployment in the united kingdom since the war in this paper we first present a competitive macroeconomic model of an open economy which is suitable for estimation and contrast this with a non competitive model we then derive unemployment equations from the various models and estimate them over annual data from 1948 1979 we draw the following conclusions i the competitive model of the labour market does not fit the facts ii the non competitive model generates an equation for the constant inflation rate of unemployment which reveals how at certain times such as the mid 1970s a combination of factors conspired to raise this level forcing the government into a deflationary stance to prevent inflation rising drastically iii a number of factors have raised the level of unemployment in a secular fashion since the war in particular the increase in the variation of relative prices the increase in the benefit to income ratio the introduction of employment protection legislation and the rise in the intersectoral shifts of the labour force

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

labour market conditions and labour force participation the case of the netherlands we develop a model to explain the relationship between unemployment and labour force participation by males and females in the netherlands following recent advances in the literature a distinction is made between temporary and permanent unemployment our findings indicate that male labour force participation is significantly influenced by the temporary unemployment variable while permanent unemployment does not seem to play a significant part for females we find the opposite

the determinants of bargaining power in an empirical model of transfers between adult children parents and in laws for south korea abstract we derive a bargaining model of transfers between adult children and their parents and then estimate the model using data from south korea our analysis extends the literature on family bargaining by i arguing that transfers from the couple represent semiprivate consumption e g it is plausible that the wife cares more about her parents than about the husband s parents and vice versa and ii using results from laboratory experiments to help identify the model we find that women have slightly more bargaining power than men in the couple s decision making we also find that when an adult child receives an extra dollar of income she transfers half of it to her parents this result is consistent with previous work finally we reject the null hypothesis that bargaining power within the family depends only on the potential wage of each spouse

risk sharing between and within families this paper uses the panel study of income dynamics to test whether risk sharing is complete between or within american families the tests accommodate a wide variety in the configuration and availability of family data the test results reject inter as well as intra family full risk sharing even assuming that leisure is endogenous or that leisure and consumption are nonseparable

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

interfirm differences in scale economies and the evolution of market shares evolutionary and resource based theories imply that firms in an industry with different resources and capabilities may differ in critical characteristics of their production functions such as economies of scale this paper measures these inter firm differences in economies of scale and examines how they affect the subsequent evolution of the market share distribution in the money market mutual fund industry the findings indicate that fund families with larger marginal benefits to increasing their scale do subsequently gain market share at the expense of their rivals but that this effect diminishes as the fund family ages perhaps as a consequence of imitation copyright 1999 john wiley sons ltd

the real wage employment relationship in the united states this article examines the real wage employment relationship in the united states in the light of the diversity of results in the literature it demonstrates that when the relationship is correctly specified in the sense that due allowance is made for technical progress and capital accumulation and the appropriate value added deflator is used for the wage then a negative relationship may be observed in the data an incorrect specification however is as likely to lead to a positive relationship as a negative one

quantity constrained household responses to ui reform this paper explores the consequences of adopting a household perspective when evaluating proposals for the reform of the canadian unemployment insurance system a model of joint behavior that allows demand side constraints to limit labor supply choices is estimated quantity constraints faced by one spouse are thus important determinants of the other s behavior predicted household responses to unemployment insurance reform proposals are negligible and differ from those that would be obtained using a model of unconstrained individual behavior copyright 1990 by royal economic society

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

testing for full insurance using exogenous information we strongly reject the full insurance hypothesis using testing variables that are not decision variables for the households under investigation we find that households are not insured against changes in the unemployment rate associated with the household head s occupational category using this exogenous information we also investigate the appropriateness of exogeneity assumptions on idiosyncratic variables that have been used as testing variables in the full insurance literature it is shown that several exogeneity assumptions made in the existing literature are potentially problematic

anticipated and unanticipated wage changes wage risk and intertemporal labor supply in this article i estimate how labor supply responds to anticipated wage growth unanticipated wage growth and wage risk using the 1989 93 panel section of the bank of italy survey of households income and wealth shiw which collects individual expectations of future wages the use of subjective expectations has several advantages first they provide information on the evolution and riskiness of future wages that the econometrician may never hope to observe moreover this avoids the need for specifying instruments for the growth rate of wages finally forecast errors can be directly controlled for thus avoiding inconsistency in short panels

intertemporal substitution in labor supply micro evidence from rural india abstract this paper tests the hypothesis of intertemporal substitution in labor supply using time allocation data on adult male and female members of agricultural households in india the robustness of the results with respect to functional form specification and credit constraints is examined the female intertemporal elasticity of substitution is found to be significant but low similar to estimates from the us elasticity estimates for males are negative or zero tests of symmetry and additive separability proved inconclusive as they are quite sensitive to functional form in addition the empirical analysis revealed significant differences in the elasticity of substitution of females depending on land ownership and whether the period of reference falls during planting and harvesting or after harvesting these differences suggest that credit constraints limit the possibilities of substitution of labor supply across time

the sensitivity of labor supply parameter estimates to unobserved individual effects fixed and random effects estimates in a nonlinear model using panel data life cycle models of labor supply predict the presence of an unobserved individual effect in the labor supply equation that is correlated with observed explanatory variables leading to an omitted variables bias in the cross section i examine the sensitivity of parameter estimates to the presence of these effects using fixed and random effect tobit models the estimated effects of children are too large in the cross section the estimated intertemporal substitution elasticity ranges from 1 1 to 1 7 the results are similar for fixed and random effects models and for models using different specifications of the dependent variable

intertemporal substitution and constraints on labor supply evidence from panel data intertemporal substitution and constraints on labor supply evidence from panel data i introduction through much of the 1970s and 1980s macroeconomic stabilization analysis has been dominated by equilibrium models in which fluctuations in employment result from intertemporal substitution workers voluntarily vary their labor supply over time in response to movements in wages and interest rates a number of recent empirical tests of intertemporal substitution models for example altonji 1982 mankiw et al 1985 ham 1986 strongly reject the intertemporal substitution approach these results have led some economists to reject equilibrium macro models in favor of keynesian models in which workers face quantity constraints on labor supply in keynesian models employment fluctuations result from changes in the severity of constraints that is changes in involuntary unemployment rather than intertemporal substitution on the other hand many economists remain unconvinced by recent rejections of intertemporal substitution models because the results are consistent with many possible explanations for tractability empirical studies always impose restrictive assumptions such as separability of utility over time and between goods or such as the existence of a representative consumer data also suffer from numerous problems such as aggregation bias measurement error and the use of average rather than marginal wage rates consequently even the authors of the studies seem hesitant to draw firm conclusions they often simply conclude that workers behavior is explained either by quantity constraints or by a more complicated intertemporal substitution model than the one they have tested 1 this paper attempts to determine which of these explanations is correct are changes in employment a sophisticated form of intertemporal substitution or are they involuntary the crucial data come from questions in the panel study of income dynamics about whether workers experience unemployment or are unable to work as many hours as they want following ham 1982 1986 this information is used to classify workers as quantity constrained in their labor supply or unconstrained i then test a simple intertemporal substitution model for each group of workers if the tests suffer from overly restrictive utility functions or data problems then the model should be rejected for both samples on the other hand if some workers truly face quantity constraints then the model should perform better for the sample of unconstrained workers 2 the tests yield two main results first the model indeed performs worse for the constrained workers for this group the data reject the model s overidentifying restrictions and the parameter estimates contradict the model in contrast the results for the unconstrained workers are weakly consistent with the model as keynesian theories suggest quantity constraints alter workers behavior second the estimates of the intertemporal labor supply elasticity for prime age men are close to zero even for unconstrained workers even if workers are free to vary their hours they apparently choose to respond little to movements in wages the paper addresses two other issues first do constraints on borrowing influence labor supply in the intertemporal substitution model workers borrow and lend to smooth consumption while varying hours of work as this suggests the model performs best for workers who not only face no labor supply constraints but who also own substantial assets and thus are unlikely to face liquidity constraints finally the paper proposes a new approach to identifying intertemporal labor supply equations previous micro studies do not adequately address the problem that wages are correlated with unobservable characteristics that affect tastes for work i propose two identifying restrictions 1 changes in tastes are uncorrelated with levels of time in variant variables and 2 changes in tastes have no aggregate component

risk financial markets and human capital in a developing country this paper explores the link between financial market incompleteness and human capital accumulation we examine how child school attendance responds to seasonal fluctuations in the income of agrarian households using panel data from rural india to pinpoint market imperfections we study responses to aggregate and idiosyncratic as well as to anticipated and unanticipated income shocks our main finding is that seasonal fluctuations in school attendance are a form of self insurance but one which does not result in a substantial loss of human capital on average

testing restrictions in a flexible dynamic demand system an application to consumers expenditure in canada traditionally restrictions on systems of demand equations have been tested using static models whilst being estimated with time series data this paper develops a vector time series model of expenditure shares in the context of a singular dynamic demand system the model allows for non symmetric and non homogeneous short run behaviour the homogeneity and symmetry restrictions are only examined in the long run structure results based on canadian time series data are presented and reject the current practise of static modelling while restrictions suggested by economic theory are not rejected when imposed on the long run structure

labor supply preferences hours constraints and hours wage tradeoffs in a labor market with tied hours wage packages and wage dispersion for a particular type of job constrained workers may be willing to sacrifice wage gains for better hours when changing jobs likewise workers may accept jobs offering undesirable hours only if the associated wage gains are large we investigate this issue empirically by examining whether overemployment and underemployment on the initial and new job affects the relation between hours changes and wage changes for quitters our results generally support the view that an individual requires compensation to work in a job that given the individual s particular preferences offers unattractive hours

pricing of monthly forward contracts in the nord pool market this paper investigates whether the pricing of forward contracts in the nord pool market is efficient monthly forward contracts were introduced in the nord pool market in 2003 likewise quarterly contracts that will replace seasonal contracts were introduced in 2004 for a transition period these contracts together with the pre existing seasonal and yearly contracts constitute the forward market in an efficient forward market the price of a seasonal forward contract should equal the time weighted average of the underlying monthly forward contracts in this paper we use historic forward price information to evaluate whether this relationship holds true and find that there are inefficiencies in the pricing

testing whether unemployment represents intertemporal labour supply behaviour in the lucas rapping 1969 model of the labour market fluctuations in unemployment represent individuals optimally adjusting their labour supply behaviour in response to fluctuations in wage rates over the business cycle in this paper i propose and implement a misspecification test of the lucas rapping treatment of unemployment as labour supply behaviour using panel data this test extends previous such work with micro data by simultaneously allowing for intertemporal substitution uncertainty and endogenous unemployment using the standard specification of intertemporal labour supply behaviour i find strong evidence against this interpretation of unemployment there are two possible interpretations of the test results the first is that it is necessary to turn to alternative models of the labour market in which unemployed workers are off a supply function the second is that the test results indicate the necessity of moving to more complex models of intertemporal substitution however given current econometric techniques and data sets these alternative models of intertemporal substitution will be extremely difficult to test

estimation of a labour supply model with censoring due to unemployment and underemployment this study proposes and implements a method of labour supply estimation which is appropriate when the sample contains unemployed and underemployed workers the estimation method consists of excluding unemployed and underemployed workers from the sample and then using to avoid selection bias an extension of heckman s approach to the case where two correlated selection rules generate the sample hausman s specification test is then used to determine whether ignoring constrained workers has led to biases in traditional labour supply estimates and the empirical results suggest that previous estimates of several important parameters are biased since the biases go in the direction that would be predicted by the hypothesis that the unemployed and underemployed are constrained the results support this hypothesis

the dynamics of company profits an international comparison 1 profits and the process of competition dennis c mueller 2 modelling persistent profitability paul a geroski 3 the persistence of profits in the united states dennis c mueller 4 the persistence of profits in us manufacturing industries ioannis kessides 5 the persistence of profitability in canada r shyam khemani and d m shapiro 6 persistence of corporate profits in the federal republic of germany joachim schwalbach and talat mahmood 7 the persistence of profits in france frederic jenny and andre paul weber 8 the persistence of profits in japan hiroyuki odagiri and hideki yamawaki 9 the persistence of profits in the uk john cubbin and paul a geroski 10 the persistence of profits international comparison hiroyuki odagiri and hideki yamawaki 11 the persistence of profits in perspective paul a geroski and dennis c mueller

time series representations of economic variables and alternative models of the labour market accepting the hypothesis that the time series facts of the aggregate labour market may be summarized by the linear autoregressive and moving average representations of wages prices unemployment and interest rates implies that a useful theory ought to lead to predictions about these representations following this approach this paper first catalogues many of the time series facts about the aggregate labour market and then compares them against alternative models of the labour market based on the intertemporal substitution and staggered contract hypotheses