Intertemporal Labor Supply and Involuntary Unemployment

Peter Haan and Arne Uhlendorff

No 2888, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we develop a model to consistently estimate the intertemporal labor supply behavior on the extensive margin (participation decision) and the intensive margin (working hours decision). In this framework we distinguish between voluntary non-participation and involuntary unemployment which is caused by labor market rationing and model the dynamics of labor supply by accounting for true state dependence and unobserved effects. Our approach follows the empirical literature on life cycle employment based on approximate decision rules. However, in contrast to previous studies, this framework allows us to test for true state dependence of voluntary non-participation, involuntary unemployment, full-time work and over-time work. Moreover, we derive consistent estimates of intertemporal labor supply elasticities over time and asses the bias of short- and long-run elasticities derived in a pure choice model of labor supply.

Keywords: state dependence; transitions on the labor market; intertemporal labor supply behavior; involuntary unemployment (search for similar items in EconPapers)
JEL-codes: C23 C25 J22 J64 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2007-06
New Economics Papers: this item is included in nep-hrm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published - published in: Empirical Economics, 2013, 44, 661-683

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Journal Article: Intertemporal labor supply and involuntary unemployment (2013)
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