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Labor Supply and Saving under Uncertainty

Martin Flodén

No 597, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: This paper examines how variations in labor supply can be used to self-insure against wage uncertainty, and the impact of such self-insurance on precautionary saving. The analytical framework is a two-period model with saving and labor-supply decisions where preferences are consistent with balanced growth. The main findings are that (i) labor-supply flexibility raises precautionary saving when future wages are uncertain, and (ii) uncertainty about future wages raises current labor supply and reduces future labor supply.

Keywords: precautionary saving; prudence; labor supply (search for similar items in EconPapers)
JEL-codes: D81 E21 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-04-22
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Economic Journal, 2006, pages 721-737.

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Journal Article: Labour Supply and Saving Under Uncertainty (2006)
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