Liquidity constraints and labor supply

Mariacristina Rossi and Serena Trucchi

European Economic Review, 2016, vol. 87, issue C, 176-193

Abstract: In this paper we shed some light on how restrictions in financial markets, the so-called liquidity constraints, might act in affecting labour supply decisions of Italian workers. One way to neutralize the existence of binding liquidity constraints is simply by supplying additional labor, instead of reducing consumption. We estimate whether resorting to additional labor supply as a smoothing consumption device is at work by using the Italian Survey of Households Income and Wealth (SHIW). The longitudinal dimension of the SHIW dataset allows us to control for individual unobserved heterogeneity. We also use an IV strategy to address the endogeneity of our measure for credit constraints in labor supply equations due to time varying factors.

Keywords: Labor supply; Liquidity constraints; Life cycle; Panel data (search for similar items in EconPapers)
JEL-codes: D1 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Working Paper: Liquidity constraints and labor supply (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:87:y:2016:i:c:p:176-193

DOI: 10.1016/j.euroecorev.2016.05.001

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