2 - Intertemporal labour supply: an assessment
Published online by Cambridge University Press: 05 January 2013
Summary
The systematic study of intertemporal labour supply began only two decades ago. In a remarkably short time the life-cycle model of individual hours choice has moved to the forefront of both micro- and macro-econometric research. This chapter begins with a look at the original questions that first led to the interest in the life-cycle approach. I then present a selective review of the evidence on various dimensions of intertemporal labour supply. I limit my discussion to micro-econometric studies of male labour supply, making no attempt at an exhaustive survey of even this branch of the literature. Rather, my goal is to offer an assessment of the success and/or failure of the life-cycle model in providing a useful framework for understanding the main features of individual labour supply.
I conclude that the life-cycle labour supply literature sheds relatively little light on the questions that first generated interest in a life-cycle approach: What determines the shape of the life-cycle hours profile? How does labour supply respond to aggregate wage changes? What is the source of idiosyncratic changes in year-to-year labour supply? Part of the reason for this stems from a tendency in the literature to concentrate on one aspect of intertemporal hours variation - the response to wage growth along a known life-cycle trajectory - and to ignore another, namely, the response to unanticipated wage innovations. In addition, much of the literature has taken the position that average hourly earnings during the year are a 'sufficient statistic' for hours choices within the year. There is considerable evidence against this narrow reading of the life-cycle model.
- Type
- Chapter
- Information
- Advances in EconometricsSixth World Congress, pp. 49 - 78Publisher: Cambridge University PressPrint publication year: 1994
- 57
- Cited by