Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications

Andrew Grodner and Thomas Kniesner

No 3034, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Our econometric research allows for a possible response of a person's hours worked to hours typically worked by members of a multidimensional labor market reference group that considers demographics and geographic location. Instrumental variables estimates of the canonical labor supply model expanded to permit social interactions pass a battery of specification checks and indicate positive and economically important spillovers for adult men. Ignoring or incorrectly considering social interactions in male labor supply can mis-estimate the response to tax reform by as much as 60 percent.

Keywords: labor supply; instrumental variables; reference group; social interactions; social multiplier; PSID (search for similar items in EconPapers)
JEL-codes: J22 Z13 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2007-09
New Economics Papers: this item is included in nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published - published in: Research in Labor Economics, 2008, 28, 1-23

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Related works:
Chapter: Labor supply with social interactions: econometric estimates and their tax policy implications (2008)
Working Paper: Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications (2005)
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