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

Andrew Grodner and Thomas Kniesner

No 69, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: Our research fleshes out econometric details of examining possible social interactions in labor supply. We look for a response of a person's hours worked to hours worked in the labor market reference group, which includes those with similar age, family structure, and location. We identify endogenous spillovers by instrumenting average hours worked in the reference group with hours worked in neighboring reference groups. Estimates of the canonical labor supply model indicate positive economically important spillovers for adult men. The estimated total wage elasticity of labor supply is 0.22, where 0.08 is the exogenous wage change effect and 0.14 is the social interactions effect. We demonstrate how ignoring or incorrectly considering social interactions can mis-etimate the labor supply response of tax reform by as much as 60 percent. Paper originally published in 2005, revised in 2006.

JEL-codes: J22 Z13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-09
New Economics Papers: this item is included in nep-lab, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://surface.syr.edu/cpr/94/ (application/pdf)

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 (2007)
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:max:cprwps:69

Access Statistics for this paper

More papers in Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University 426 Eggers Hall, Syracuse, New York USA 13244-1020. Contact information at EDIRC.
Bibliographic data for series maintained by Katrina Fiacchi ().