How important is precautionary labor supply?

Robin Jessen, Davud Rostam-Afschar and Sebastian Schmitz

No 2016/10, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: We quantify the importance of precautionary labor supply using data from the German Socio- Economic Panel (SOEP) for 2001-2012. We estimate dynamic labor supply equations augmented with a measure of wage risk. Our results show that married men choose about 2.5% of their hours of work or one week per year on average to shield against unpredictable wage shocks. This implies that about 26% of precautionary savings are due to precautionary labor supply. If self-employed faced the same wage risk as the median civil servant, their hours of work would reduce by 4%.

Keywords: wage risk; labor supply; precautionary saving; life cycle; dynamic panel data (search for similar items in EconPapers)
JEL-codes: C23 D91 J22 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-eur, nep-lma and nep-pbe
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Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/142123/1/860810062.pdf (application/pdf)

Related works:
Journal Article: How important is precautionary labour supply? (2018)
Working Paper: How Important Is Precautionary Labor Supply? (2016)
Working Paper: How important is precautionary labor supply? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:201610

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