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How to Identify Interdependence Behavior in an Empirical Model of Labor Supply

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  • Aronsson, T.
  • Blomquist, N.S.
  • Sacklen, H.

Abstract

In this paper we test a particular form of interdependent behavior, namely the hypothesis that individuals´ choices of hours of work are influenced by the average hours of work in a social reference group. There are problems to empirically disentangle the effects of interdependent behavior and preference variation across groups. We show that panel data or data from several points in time are needed. In the empirical analysis we combine cross-section data from 1973, 1980 and 1990. Our results support the hypothesis of interdependent behavior. The implication is that conventional tax policy predictions, in which preference interdependencies are neglected, will tend to underestimate the effect of a tax reform on hours of work. Our point estimates suggest that conventional calculations would capture only about a third of the actual change in hours of work.
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Suggested Citation

  • Aronsson, T. & Blomquist, N.S. & Sacklen, H., 1992. "How to Identify Interdependence Behavior in an Empirical Model of Labor Supply," Papers 1992-5, Uppsala - Working Paper Series.
    • Handle: RePEc:fth:uppaal:1992-5
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    References listed on IDEAS

    as
    1. Alessie, R.J.M. & Kapteyn, A.J., 1991. "Habit formation, interdependent preferences and demographic effects in the almost ideal demand system," Other publications TiSEM 7d3ef697-5355-430e-b595-9, Tilburg University, School of Economics and Management.
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    4. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
    5. Woittiez, Isolde & Kapteyn, Arie, 1998. "Social interactions and habit formation in a model of female labour supply," Journal of Public Economics, Elsevier, vol. 70(2), pages 185-205, November.
    6. Alessie, Rob & Kapteyn, Arie, 1991. "Habit Formation, Interdependent References and Demographic Effects in the Almost Ideal Demand System," Economic Journal, Royal Economic Society, vol. 101(406), pages 404-419, May.
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    More about this item

    Keywords

    labour market ; supply;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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