PRICE LEVEL UNCERTAINTY, SAVING, AND LABOR SUPPLY

This paper derives the implications, for individual saving and labor supply, of increased uncertainty about the future price level. The framework for the analysis is a two-period model in which saving and labor supply are alternative sources of both present disutility and future income. The individual is assumed to make simultaneously his saving and labor supply decisions prior to the resolution of the uncertainty about the future price level. We find that, under theoretically plausible and empirically relevant assumptions about attitudes toward risk, an increase in future price level uncertainty increases individual saving and labor supply. These results imply that, for the economy as a whole, increased uncertainty about the future price level increases output and employment, while decreasing the real rate of interest, the present price level, and economic welfare.     

The demand for leisure time in the presence of constrained work hours

This article presents a labor supply model designed to address situations of overemployment or underemployment in the labor market. Previous labor supply models have taken the possibility of work hour constraints into consideration but typically assumed that the existence of fixed work hours only influenced the decision of labor force participation. This ignores situations in which individuals choose to be employed at fixed-hour jobs even though these jobs do not offer the desired work hours.     

CREDIT CONSTRAINTS AND LABOR SUPPLY: EVIDENCE FROM BANK BRANCHING DEREGULATION

This paper examines labor supply adjustment-both at the intensive and extensive margins-following financial market development. Specifically, we exploit the staggered passage of bank branching deregulation in the United State to study the impact of relaxing credit constraints on labor supply decisions. We find strong evidence that improvements in how credit markets function decrease weekly hours worked, and that the effect is most significant for the lower-middle (marginal) income group. Furthermore, we observe heterogeneous responses across demo graphic groups (race and income). In contrast, we find little to no evidence that deregulation has a significant impact on the extensive margin of participation.     

REAL WAGE AND EMPLOYMENT UNCERTAINTY AND THE LABOR FORCE PARTICIPATION DECISIONS OF MARRIED WOMEN

This paper argues that an important factor in a married woman's decision to enter the labor force is the degree of uncertainty associated with expectations offuture wages and (husband's) income, and that high levels of uncertainty during the 1970s may have contributed substantially to the growth in participation in that decade. We apply a model of autoregressive conditional heteroskedasticity to aggregate time series data to measure the level of uncertainty in each period. Our estimates support our hypothesis that the level of uncertainty is an important determinant of labor force participation for married women.     

Labor and Production Barriers to the Reduction of Agricultural Chemical Inputs1

Abstract Advocates of sustainable agriculture consider farmer flexibility and innovativeness a key element in efforts to develop farm practices that reduce chemical inputs. In contrast to labor displacing technologies, farming with reduced chemical inputs may increase labor demands. Consequently, concerns about labor supply may affect farmer adaptability in reducing chemical inputs. This research addresses two specific questions. First, how concerned are farmers about the availability of labor needed to reduce chemical inputs? Second, do farmers view production problems as insurmountable without chemicals because of labor constraints? The majority of farmers surveyed agree that it is difficult to reduce chemical inputs because additional labor is hard to find, and their own labor inputs would have to increase. Results of OLS regression analysis show that whether the farmer hires workers affects the relationship between perceived labor and production barriers. Labor supply is less elastic for farmers who hire no labor, and they have less access to social networks that would provide them with sources of the additional workers needed if chemical inputs were reduced. The significance of these results for the development of sources of information that enhance farmer adaptability is discussed.     

INTERTEMPORAL SUBSTITUTION AND CONSTRAINTS ON LABOR SUPPLY: EVIDENCE FROM PANEL DATA

This paper tests an intertemporal labor supply model for workers who say they face quantity constraints on their hours and for workers who say they do not. The data reject the model for the first group but not for the second. I conclude from this evidence that employment fluctuations result mainly from changes in the severity of constraints—that is, changes in involuntary unemployment—rather than intertemporal substitution. It also appears that liquidity constraints influence labor supply. Finally, the paper proposes a new approach to identifying intertemporal labor supply equations.     

The EITC and the labor supply of adult dependents: direct effects and family income effects

Tax data suggest that the population of adult dependents—adults relying on the support of others for the majority of their financial needs—has more than doubled over the last decade. However, little is known about how taxes affect the labor supply decisions of this population. This paper provides an initial investigation, studying the impact of the Earned Income Tax Credit (EITC) expansions of the early 1990s on the labor supply of adult dependents living with their relatives. I find that dependent individuals who were not a part of the nuclear family responded to the EITC expansions, increasing labor force participation by about 5 percentage points. For adult children, I show that the absence of a net response is likely due to an unexpected consequence of the EITC: expanded family credits led to a decrease in their labor force participation.     

TAXATION, GOVERNMENT SPENDING, AND LABOR SUPPLY A DIAGRAMMATIC EXPOSITION

The effects of a change in the level of taxation on labor supply are examined under the assumption that the government budget balances. The government spends tax revenues either on redistributions (which are assumed to have an income effect on labor supply) or on other government goods (which are assumed not to influence labor supply). In order for a rise in the tax rate to increase the quantity of labor supplied, it must be that (i) the labor-supply function bends backward, and (ii) sufficiently little of the increased tax revenues are redistributed. The quantity of labor supplied must fall if all marginal tax revenues are redistributed.     

Scheidung in Ost- und Westdeutschland

This paper compares marital stability of East and West German women before re-unification in 1990. It is analyzed to what extent women in both countries differed concerning the risk to experience a first divorce and what factors caused these differences. The main focus is on the impact of women’s labor force participation on marital stability. While the GDR, in terms of women’s participatio in the labor market, was based on egalitarian role expectations, the social and institutional constraints of the FRG supported the male-breadwinner model. The oppositeness of these role models makes it possible to investigate whether the interrelation between women’s labor force participation and marital stability differs between traditional and egalitarian societies. The empirical analyses, based on the German Fertility and Family Survey (1992), show a significantly higher divorce risk for East German women that is primarily caused by the smaller number of religious people, a higher share of women that experienced a parental divorce and the higher number of employed women in the GDR. In both countries women’ labor force participation was connected with a higher divorce risk, but the effect was stronger in West than in East Germany. Thus, this study yields evidence for a weaker negative relationship between women’s labor force participation and marital stability in societies that are dominated by egalitarian in comparison to traditional role expectations.     

Female Labor Force Participation in Urban and Rural China1

Abstract The objective of this study is to examine female labor force participation and its determinants in rural and urban China. The sociological literature has demonstrated that participation tends to increase in urban and industrialized places where women have higher levels of education and fewer children, where more workers are engaged in service pursuits, and where family structure is less traditional. With the use of data on counties and cities (N = 2,377) from the I-percent sample of the 1982 census of the People's Republic of China, it was found that female labor force participation is likely to rise in areas with increased agricultural employment, educational levels, proportion of female-headed households, and higher male-to-female sex ratios. Both the size of the service sector and the fertility rate had negligible effects on female labor force participation. Although, on average, rural places have slightly higher levels of female labor force participation, when other variables are controlled, urban places have a higher rate of female participation. In addition, the findings suggest that market factors (i.e., education) are more likely to determine the rate of female labor force participation in urban areas; whereas demographic and social factors (i.e., sex ratio and household structure) play a more important role in explaining the female labor force participation in rural counties.     

Will the possibility of divorce discourage marriage-specific investment?

Becker et al. (1977) argue that the possibility of divorce discourages the accumulation of marriage-specific capital. Their argument has been confirmed by empirical studies that assume labor supply and marriage-specific investment are negatively related. We argue that since it is possible for individuals to increase marriage-specific investment without changing labor supply simultaneously, the conventional approach using the change in labor supply to infer to the change in marriage-specific investment may lead to a biased conclusion. This paper incorporates dynamic and stochastic optimal control approach into a material-spiritual goods framework. The model disentangles marriage-specific investment form other marital effort, and demonstrates that only part of effort devoted to marriage is marriage-specific investment and only the individuals who have spiritual and emotional needs make marriage-specific investment. Marriage-specific investment is highest in marriages where individuals behave altruistically, lower in marriages where individuals behave selfishly, and zero in marriages where spiritual goods are not valued. The model also implies a result that is contrary to conventional wisdom: the possibility of divorce does not always discourage, and may even encourage, marriage-specific investment. Since the impact of the divorce risk on marriage-specific investment depends on three factors: time preference, the level of the risk and the correlation between the divorce risk and marriage-specific capital, it could be optimal for an individual to invest more under uncertainty than in the corresponding risk-free world if he or she can well understand and predict his or her partner's spiritual needs. The key factor in the decision process is the confidence in predicting the partner's spiritual needs.     

WHY ARE U.S. WOMEN DECREASING THEIR LABOR FORCE PARTICIPATION IF THEIR WAGES ARE RISING?

Given the traditional interpretation of women's labor force participation rate (LFPR) trends as movements along a positively sloped labor supply curve, it is surprising that the recent downward trend in U.S. women's LFPR has occurred over a period when women's real wages were commonly believed to be rising. I find that almost two‐thirds of the decline since 2000 is attributable to aging of the adult female population. The remainder, due to declining labor force participation for women under 55, becomes less puzzling in light of my evidence that the wage/education locus faced by women actually may have worsened since 2000. (JEL J21, J31, J82)     

Structural shifts in the employment of foreign workers in Austria

The full economic importance of immigration becomes clear only when one examines the concentration of immigrant workers in certain industries and occupations, and this is done in the case of Austria to show the degree of segmentation of the labor market between indigenous and foreign labor. In the course of the 1960s the employment of foreign labor gained importance in Austria. As a consequence, bilateral agreements with the major recruiting countries were made, e.g., with Spain in 1962 and 1969, with Turkey in 1964, and with Yugoslavia in 1966. The reason for the increasing demand for foreign labor was the short supply of indigenous labor due to increasing participation rates and strong economic growth. The demand-pull for foreign labor gained momentum with the onset of the economic boom in 1970, so that by the end of 1973 the number of foreign workers had doubled in comparison to 1970. The 226,800 foreign workers accounted for 8.7% of total employment. The 1974-75 recession and the weak economic development ever since resulted in a decreasing demand for labor. At the same time, the supply of indigenous labor increased as a consequence of a demographic effect and because of increasing participation rates of women. From 1981 to the present, foreign employment decreased again due to the unusually long period of economic stagnation. During 1983, 145,300 foreign workers were engaged, i.e., 5.3% of total employment. The structure for foreign employment now differs greatly from that in the 1960s. The share of women in foreign employment has increased steadily from some 20% in the early 1960s to 31% in 1973 and 40% in 1983 -- a value comparable to the Austrian female share in employment. The reduction of foreign employment since 1973 affected, above all, Yugoslav men. the share of Yugoslavs in foreign employment decreased from 196,300 or 79% in 1973 to 92,200 or 61.7% in 1983. With the duration of foreign employment rising, the disribution of foreign labor over economic branches increased. In the early 1960s the employment of foreign workers was concentrated in 3 branches -- the construction sector (32% of all foreign workers), metal industries (16%), and textile industries (10%). In 1982 only 1/3 of all foreign workers were still employed in these branches as an infiltration by foreign labor had taken place in all sectors. The services sector showed the greatest increase in foreign employment since 1975. There has never been as strong a concentration of 1 nationality in a particular economic branch as in Switzerland, Germany, or France. Case studies in Austria reveal that it was an explicit policy for firms (and also unions and entrepreneur representatives) not to depend on only 1 nationality of foreign workers. According to the case studies, about 1/3 of all foreign workers today occupy jobs which are in direct competition with indigenous labor. Another 1/3 fill jobs which are complementary to indigenous labor. For the remainder it is difficult to say to what extent they belong to one or the other segment of the labor market, because there is no information available on the occupational job structure.     

How can gender discrimination explain fertility behaviors and family-friendly policies?

This paper focuses on the interaction between gender discrimination and household decisions. It develops a model with endogenous fertility, endogenous labor supply and endogenous size of government spending. Family policies which concern childcare services are assumed to reduce the time that parents spend on their children. The model shows that gender discrimination may explain differences in household decisions between countries. The solution shows a U-shaped relationship between fertility and gender discrimination if the quality of childcare services is sufficiently high. In the decreasing part of this U-shaped curve, a decrease in the discrimination level implies a related increase in fertility, women’s participation in the labor force and in family-friendly policies.     

Does the minimum wage drive teenagers out of the labor force?

Labor force participation is directly related to the value of being in the labor force. The effect of the minimum wage on labor force participation thus measures how the minimum wage affects the welfare of labor force participants. In contrast, a decline in employment tells us little about welfare, because of the offsetting wage increase. Only changes in labor force participation can directly measure the welfare effects of the minimum wage. Despite this, most literature about the minimum wage has been focused on employment. My empirical results show that the minimum wage has a significant negative effect on teenage labor force participation. Thus, a minimum wage reduces the value of entering the labor market.     

Do Mothers Work to Support Ailing Husbands?

This paper analyzes the role of a spouse's poor health in forming the mother's labor force participation decision. The data are drawn from the 1996 Survey of Income and Program Participation (SIPP), which follows individuals for four years. This paper uses a medical expenditure approach to measuring health. Because SIPP is a panel dataset, changes in health and labor force participation can be observed. This paper finds an increase of 8% in the wife's labor force participation when the health of the spouse falls from excellent to poor. This result of the changes in the mother's labor force participation is consistent with previous literature, indicating that this new health measure performed well.     

THE ROLE OF ASSETS IN LABOR SUPPLY FUNCTIONS

This paper examines the argument advanced by Smith (1977) that it is inappropriate to include current assets in labor supply functions, under the assumption that a life-cycle model underlies both the asset accumulation process and the labor supply process. It is shown that on a theoretical level current labor supply may still be viewed as a function of current assets. It is also demonstrated that in empirical work based upon a life-cycle labor supply model, it may or may not be appropriate to use current assets or current wealth as an independent variable in a labor supply regression     

Does religion influence the labor supply of married women in Germany?

Using behavioral theories, this article analyzes whether religion influences married women in Germany in their decision to supply labor. Gender roles and accompanying attitudes toward the division of labor among spouses might differ across religious groups depending on the groups’ strictness. Examining data from the GSOEP, the findings suggest that denominational affiliation itself only weakly influences women’s labor participation decisions. However, women who participate regularly in religious activities are less inclined towards paid employment. Furthermore, there is evidence that the presence of a spouse with a strong belief also affects a woman’s supply of labor negatively.     

Production Inflexibilities and the Cost Channel of Monetary Policy

This article shows how the existence of production inflexibilities in the form of capacity utilization constraints conditions the magnitude of the response of macroeconomic variables to a money supply stimulus. Capacity is modeled under explicit microfoundations, where the existence of idiosyncratic demand uncertainty generates variable utilization rates across firms. In this context, money has real effects due to non-Fisherian effects stemming from limitations in households' access to the financial market. Firms' capacity constraints generate a convex aggregate supply curve, which is a feature of the economy that has important implications for the conduct of monetary policy.     

Token Presence or Substantive Participation? A Study of Labor Trustees on Pension boards

In contrast to their absence from corporate boards in North America, labor representatives do have a seat on many pension boards. Given the lack of research on the role of labor participation in these fora, this study reports findings from a survey of labor trustees. We find that labor trustees make greater contributions to procedure-oriented processes such as information sharing, rule-making and rule interpretation; and, fewer contributions to investment-oriented processes such as investment decisions, fund performance and manager selection. Gender does not seem to matter in explaining participation in board activities. Accountability in terms of a requirement to report back to their union did increase labor trustee contribution but only to procedural issues, not investment issues. Short board tenure, lack of multiple labor seats and lack of training appear to limit labor trustees’ contribution to investment-based issues. Prior exposure to pension issues, and longer tenure appear to increase contributions to procedure-based issues. Exclusionary board dynamics hinder both types of contributions by labor trustees. These findings suggest that labor trustees do take advantage of their position to make procedural contributions but they find it hard to expand into newer, non-traditional roles such as investment-related activities of the Board.