Non-Wage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females

Francis Vella

No 267067, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper examines the estimation of a simultaneous model of hours and wages. We argue the relationship between weekly hours worked and the hourly wage is due to increasing marginal tax rates. As the total wage increases, due to increasing hours, employers and employees avoid taxation by substituting wages with non-taxable non-wage benefits. This is attentuated by labor legislation entitling employees to employer provided benefits. We estimate a wage that is independent of any benefit effect and employ it in the labor supply functions. An estimator is presented for the wage/hours market locus and the structural labor supply function. An application to the data examined Moffitt (1984) supports the validity of the procedure. A second application reveals that a previous study which concluded that the labor supply function of young females is downward sloping is misleading.

Keywords: Financial Economics; Labor and Human Capital; Public Economics (search for similar items in EconPapers)
Pages: 43
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/267067/files/monash-097.pdf (application/pdf)
https://ageconsearch.umn.edu/record/267067/files/monash-097.pdf?subformat=pdfa (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267067

DOI: 10.22004/ag.econ.267067

Access Statistics for this paper

More papers in Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().