How important is precautionary labour supply?

Robin Jessen, Davud Rostam-Afschar and Sebastian Schmitz

Oxford Economic Papers, 2018, vol. 70, issue 3, 868-891

Abstract: We quantify the importance of precautionary labour supply defined as the difference between hours supplied in the presence of risk and hours under perfect foresight. Using the German Socio-Economic Panel from 2001 to 2012, we estimate the effect of wage risk on labour supply and test for constrained adjustment of labour supply. We find that married men choose on average about 2.8% of their hours of work to shield against wage shocks. The effect is strongest for self-employed, who we find to be unconstrained in their hours choices, but also relevant for other groups with more persistent hours constraints. If the self-employed faced the same wage risk as the median civil servant, their hours of work would be reduced by 4.5%.

JEL-codes: C23 D12 E21 J22 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: How Important Is Precautionary Labor Supply? (2016)
Working Paper: How important is precautionary labor supply? (2016)
Working Paper: How important is precautionary labor supply? (2016)
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