Hours and Wages

This paper examines the potential effect of hours worked on wages, both contemporaneously and dynamically. We first present an array of evidence on the relationship between wages and usual weekly hours using both cross-section and panel data. In the cross-section we document how this relationship varies with age, gender and occupation. A robust finding is that the relationship between hours and wages differs across the hours worked distribution. We next explore the extent to which a benchmark structural model of labor supply can be used to infer the effect of hours on wages. Imposing functional forms on the nature of heterogeneity we find that we can identify the profile of effects of hours on wages up to a rotation.