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Hours and Wages

Author

Listed:
  • Alexander Bick

    (Arizona State University)

  • Adam Blandin

    (Virginia Commonwealth University)

  • Richard Rogerson

    (Princeton University)

Abstract

We develop and estimate a static model of labor supply that can account for two robust features of the cross-sectional distribution of usual weekly hours and hourly wages. First, usual weekly hours are heavily concentrated around 40 hours, while at the same time a substantial share of total hours come from individuals who work more than 50 hours. Second, mean hourly wages are non-monotonic across the usual hours distribution, with a peak for those working 50 hours. The novel feature of the model is that earnings are non-linear in hours and the nature of the nonlinearity varies over the hours distribution. We estimate the model on a sample of older males for whom human capital considerations are plausibly not of first order importance. Our estimates imply that an individual who chooses to work either less than 40 hours or more than 40 hours faces a wage penalty. As a consequence, individuals working typically 40 hours are not very responsive to variation in productivity. This has significant implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous agent-incomplete markets model and for strategies designed to estimate the intertemporal elasticity of substitution.

Suggested Citation

  • Alexander Bick & Adam Blandin & Richard Rogerson, 2021. "Hours and Wages," Working Papers 2021-86, Princeton University. Economics Department..
  • Handle: RePEc:pri:econom:2021-86
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    Cited by:

    1. Iván Fernández‐Val & Aico van Vuuren & Francis Vella & Franco Peracchi, 2024. "Hours worked and the US distribution of real annual earnings 1976–2019," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(4), pages 659-678, June.
    2. Titan Alon & Matthias Doepke & Jane Olmstead-Rumsey, 2020. "This Time It's Different: The Role of Women's Employment in a Pandemic Recession," Working Papers 2020-057, Human Capital and Economic Opportunity Working Group.
    3. Etienne Lalé, 2019. "Search and Multiple Jobholding," Upjohn Working Papers 19-305, W.E. Upjohn Institute for Employment Research.
    4. Jeffrey T. Denning & Brian A. Jacob & Lars J. Lefgren & Christian vom Lehn, 2022. "The Return to Hours Worked within and across Occupations: Implications for the Gender Wage Gap," ILR Review, Cornell University, ILR School, vol. 75(5), pages 1321-1347, October.
    5. Paula A. Calvo & Ilse Lindenlaub & Ana Reynoso, 2021. "Marriage Market and Labor Market Sorting," NBER Working Papers 28883, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    employment; wages; labor supply;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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