A structural dynamic microsimulation model of household savings and labour supply

A structural model of the household is described that represents current best-practice in the analysis of savings and labour supply responses to the policy environment. Care has been taken in specifying the model so that it represents an appropriate basis for the analysis of incentive effects to policy change, and for exploring the empirical support for alternative structural assumptions. Matching the model to survey data for the UK reveals some interesting puzzles in relation to the timing of retirement.     

Determinants of household savings in China and their role in quasi‐money supply1

This study derives household saving potential empirically from econometric models of Chinese urban and rural household consumption and uses this potential to explain household bank deposits. Model simulations are performed to analyse the effects of interest rates, income and income uncertainty on the saving potential and the bank deposits. The bank deposits variable is then used to explain quasi‐money supply. High bank absorption of household savings is found to account mainly for the rapid growth in quasi‐money, which in turn explains the exceptionally high M2/GDP ratio. Households’ savings are largely predictable from their regular consumption.     

Linkages among welfare,food assistance programmes and labour supply: evidence from the survey of programme dynamics

At the centre of the debate on welfare reform is whether incentives-based systems help poor families move out of poverty into jobs. Recent data from the first Survey of Programme Dynamics longitudinal and the 1998 experimental data files allow evaluation of the interaction among the Food Stamp Programme (FSP), Temporary Assistance for Needy Families (TANF) programme and labour force participation under different programme design and economic conditions. A model that incorporates jointly determined programmes participation and work decisions is applied to a sample of working age, lower income and asset households. Participation in TANF increases the probability of FSP participation and decreases the probability of being in the work force; working decreases the probability of receiving food stamps. Work, TANF, and FSP participation are related, and TANF and FSP participation rates among poor households who are potentially eligible for TANF are sensitive to changes in programme parameters; as expected, labour force participation is affected by the general economic conditions.     

Taxes,female labour supply and household income: differences between the Netherlands and the Federal Republic of Germany

The article investigates the effect of taxes and social premiums on female labour supply and household income. A comparison is made between labour supply and household income between the Netherlands and the Federal Republic of Germany in 1992. A discrete choice model for labour supply is used in which taxes and social premiums are implicitly incorporated. As male labour supply is highly inelastic an individual, male chauvinist model is used. The estimated models are used to simulate the effect of the differences in the tax and social premium system on the differences in labour supply and income between both countries. The results indicate that labour force participation is higher the more individualized the system. The German system leads to a lower tax burden compared to the Dutch system. It is concluded that differences in the tax and social premium system between both countries have hardly any influence on the differences in the inequality of net household labour income. There is evidence that the German system leads to a slightly more unequal distribution of household income. It is also concluded that although the tax and social premium system does influence labour supply and income, it can be doubted whether these effects are substantial.     

A test of a unitary model on labour supply using the information of household decision-making systems

This article tests whether a unitary model is consistent with household behaviour using the data of two-earner couples. It focuses on the unitary model assuming that all family members have the same utility function. The analysis investigates the difference in a husband's and wife's labour supply between the household that determines the wife to be the main decision-maker and the household that selects a different decision-making system under the control of individual and household characteristics. The estimation employs a treatment effects model to consider the selectivity bias caused by unmeasured characteristics. Results show that the household with the wife as the main decision-maker increases the husband's working hours by 15% and decreases the wife's working hours by 59%, compared to the household that selects a different decision-making system. This implies that the unitary model is rejected. Additionally, the husband's wage rate, the husband's and wife's health status, and their gambling addiction determine the household decision-making system such as the variables that determine the reservation utility of not being married. The effect of the decision-making system on the labour supply and that of the determinant factors on the decision-making system are consistent with the implications obtained from Nash bargaining models and collective models.     

Female labour supply in Australia: Another example of a backward-bending labour supply curve

Hours worked by employed married females in Australia are analysed using techniques to correct for sample selection bias. Consistent with the conclusions of the study of female labour supply in the U.S. and Canada by Nakamura and Nakamura (1981), working wives work fewer hours per week when paid higher hourly wage rates.     

Gender roles,labour market participation and household income position

In empirical research on labour supply behaviour, variables like age, education or the household's financial situation as well as economic and demographic characteristics, social attitudes and gender role schemes are believed to influence the annual working hours. This paper starts from the assumption that these determinants work differently according to the poverty level of the household in which the individual lives. Using data from the German Socio-Economic Panel (GSOEP), the paper empirically tests this hypothesis for women and men living in households with a disposable income above the poverty line and of those living in poor households. The results of multiple regression analysis show traditional gender role patterns in labour supply decisions, but only for persons in households with an income above the poverty line.     

In-school labour supply,parental transfers,and wages

In many industrialised countries, teenagers have a significant spending power, and they are important customers for specialised industries. The income of teenagers still in full time education comes from two major sources: parental pocket money and earnings from part-time jobs. Little is known about the way these sources interact, and how they depend on parental, school and family characteristics. In this paper, we analyse labour supply of 16 year old British teenagers together with the cash transfers made to them by their parents. We first develop a theoretical model, where labour supply and transfers are jointly determined. We then estimate labour supply and transfers jointly, using unique data on labour supply of teenagers, the wages they receive, and the transfers from their parents. We show how these two processes depend on each other, and how transfers and labour supply react to changes in wages. We are grateful to the Leverhulme Trust for financial support for this research, which has also benefited from support to the IFS as a Designated Research Centre of the ESRC. We thank Murali Agastya, Richard Blundell, Ian Preston, Frank Windmeijer, and two anonymous referees and the editor Bernd Fitzenberger for useful comments.     

Farm income,market wages,and off-farm labour supply

In most developed countries we observe an increasing share of part-time farming at the expense of full-time farmers. In the present paper, we develop a theoretical labour supply model which accounts for the specific decision problem of a farmer. The empirical analysis uses the ordered probit and a Tobit model to explain labour supply behaviour for a sample of farm households in Upper Austria. Farm size, household characteristics, as well as education significantly influences off-farm labour supply behaviour. The obtained wage elasticities for male farmers are comparable in magnitude to those obtained in labour supply studies for adult females or elderly people.

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Zusammenfassung Nebenerwerbslandwirtschaft entwickelt sich immer mehr zur vorherrschenden Form der Erwerbstätigkeit von Landwirten. Die Erwerbsentscheidung zwischen Voll-, Zu- und Nebenerwerb wird im Rahmen eines statischen Arbeitsangebotsmodells untersucht und mit Hilfe eines Ordered-probit-bzw. eines Tobit-Ansatzes für 1.842 landwirtschaftliche Haushalte in Oberösterreich getestet. Das Arbeitsmarktverhalten von Landwirten ist gekennzeichnet durch eine hohe Lohnelastizität vergleichbar den Ergebnissen für das Erwerbsverhalten von Personen auf dem sekundären Arbeitsmarkt. Darüber hinaus läßt sich ein signifikanter Einfluß der Betriebsgröße, der Struktur des landwirtschaftlichen Haushaltes sowie der Art und des Umfangs der Ausbildung des Betriebsleiterehepaares erkennen.

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We are grateful to the Agrar- und Forstrechtsabteilung der oberösterreichischen Landesregierung for giving us access to the data set, and E. Fürst for helpful assistance in data preparation. We are indebted to the participants of the first annual conference of the Austrian Association of Agricultural Economists (ÖGA) held in Vienna in October 1991 and especially to R. Winter-Ebmer, M. Hofreither, and three anonymous referees for valuable comments.     

Variable labour supply, specialisation-based external economies, and capital inflow

This paper examines the impact of exogenous capital inflow on prices, production, labour supply, and welfare in the presence of specialisation-based externalities. The paper utilises a simple model of an economy that produces one-final good by means of capital, labour, and a large number of varieties of an intermediate good. The intermediate good is produced by means of capital and labour. The supply of capital is exogenous but the supply of labour is endogenous. The presence of internal economies of scale in the intermediate good industry gives rise to specialisation-based external economies in the production of the final good. Perfect competition prevails in the final good industry whereas the intermediate good industry operates under Chamberlinian monopolistic competition. It is shown that exogenous capital inflow decreases labour supply and increases welfare only if the elasticity of substitution between leisure and the final good is equal to or less than unity. The paper also shows that, if trade opens up between two otherwise similar economies, a capital rich country would be a net importer of varieties of the intermediate good.     

The determinants of female labour supply in Hungary

The aim of this paper is to closely examine the effect on a married woman's labour supply decision of non-labour income and of her own wage rate in a transition economy. The paper first shows that labour force participation rates for Hungarian females, though decreasing, were still extremely high and comparable to male economic activity in western countries. It then estimates labour supply parameters using a model that controls for sample selection issues associated with the labour supply of married women. Wage elasticity is estimated to be high and positive (1.81) while the income effect is consistent with leisure being a normal good. No sample selection bias is found.     

Job satisfaction,job match quality and labour supply decisions

This paper introduces job satisfaction into neoclassical theory of labour supply. This simple integration produces non-trivial results: job satisfaction is able to reduce disutility of labour, thus increasing labour supply; also, if job satisfaction is very high, labour could generate utility, while leisure could provide disutility. In this paper, job satisfaction, and thus job match quality, is specified in terms of appropriate collocation of the worker in the workplace; in short, the higher the matching between the investment in education and the task assigned in the workplace, the higher the job satisfaction. An empirical analysis substantiates the two main predictions of this paper, namely the key role of job satisfaction in time allocation and labour supply decisions and the plausibility of our view about job satisfaction.     

Endogenous gender power,household labor supply and the demographic transition

We present a microeconomic model of the household in which there exists no difference in spousal preferences but childrearing is more time costly for women. Bargaining between the wife and the husband forms the basis of household decisions. Marital bargaining power is determined according to the incomes of the spouses, which in turn help to determine their reservation utility levels outside the marriage. The endogeneity of bargaining power introduces a non-cooperative element to the couples' decision-making problem because both the husbands and the wives take into account how their pre-marital education decisions affect their marital power and the share they extract from household resources in the future. The model predicts that wives invest more than is Pareto efficient in their education in order to increase their bargaining power in marriage. As a consequence, couples have fewer children and consume more when exogenous structural changes lead women to invest more in education. A corollary of the model is that empowering women directly through social reforms such as a lower gender wage gap leads to lower fertility and higher spousal consumption and leisure.     

The supply of qualified nurses: a classical model of labour supply

The need to ensure adequate numbers of nurses is a key requirement of the current modernization of the UK NHS. However, it is unclear how effective wages are as an instrument to maintain or increase the nursing workforce, both in terms of absolute numbers and in the number of whole time equivalents. This study sets out to estimate a classical model of labour supply for British qualified married or cohabiting nurses and midwives, looking at both the participation decision and the hours of work supplied. Data are from the Quarterly Labour Force Survey over the years 1999–2000. Participation and hours of work are found to be inelastic with respect to own wage. These results suggest that increasing the wage would only have a moderate effect on labour supply. Interestingly, there is no significant statistical difference between having a child of nursery age (3–4) and having a child of school age (5–15) on participation and hours supplied. This suggests that recent policy initiatives to increase female labour force participation, through the provision of free nursery places, has been successful. Preliminary analysis of a split private and public sector sample suggests that hours supplied are completely inelastic with respect to wages in the public sector.     

The impact of taxes on female labour supply

There is little agreement in economics on the factors influencing labour supply and hence on the impact of taxes. Within the marginal model, real wages and incomes are directing people's labour market behaviour independent of time and space, whereas the human resources approach takes account of the social environment and past behaviour. Even if strong assumptions are made, the neoclassical theory cannot predict the outcome of a wage increase. The labour supply response depends on the relative strengths of the substitution and the income effect. Since nonparticipation in the labour market is explained by a reservation wage being higher than the market wage, this is the only situation in which neoclassical theory would predict a rise in labour force participation with a wage increase. This case occured in a ‘natural experiment’ in Sweden. The Swedish tax system changed in 1971 from joint to separate taxation of spouses resulting in a substantial increase in the net wage of married women. This article investigates the impact of the change in the Swedish tax system on female labour force participation, concluding that it cannot explain the substantial rise in the participation rates of Swedish women. This is a significant result, questioning standard neoclassical theory and supporting the more institutional views of human labour market behaviour. That is that time and space as well as the social environment are important when analyzing labour supply. This will have consequences for international comparisons. Only factors which explain developments within one country might be relevant for explaining international differences, e.g. in labour force participation.     

Preferences and the labour supply of married women

The paper reports the main results of using British cross-section data to estimate a labour supply function in which preference variables are interacted with terms measuring the slope and position of the budget constraint.     

Fertility,household structure,and parental labor supply: Evidence from China

This study examines the effects of fertility on household structure and parental labor supply in China. To solve the endogeneity problem, we use a unique survey on households with twin children and a comparison group of non-twin households. The ordinary least squares estimates show a negative correlation between fertility and parental labor supply in rural China. Using twinning as a natural experiment, we do not find evidence on the negative effects of fertility on parental labor supply. By contrast, we find that the twinning-induced increase in fertility significantly enhances the coresidence of grandparents in rural China. We suggest that the negative effects of fertility on parental labor supply are mitigated by the childcare provided by grandparents in rural China. We also find that fertility does not induce coresidence of grandparents in urban China. Our results have important implications for population and public childcare policies.     

Informal parental care and female labour supply in Japan

Using the Japanese Study of Aging and Retirement, Japan’s first globally comparable panel survey of the elderly, we estimate the effect on female employment in Japan due to the provision of informal parental care. We observe that informal parental care has little impact on female employment, after controlling for endogeneity of informal care or individual unobserved time-invariant heterogeneity. This finding is consistent with those observed in Europe and the US, underscoring a limited association between care and work in Japan, which is facing ageing at the fastest pace among advanced economies.     

Self-insurance in a life-cycle model of labour supply and savings

This paper analyses the incentives to work and to save over the life cycle in the presence of incomplete markets. In a calibrated, partial equilibrium model, flexibility in hours worked changes asset age-profiles: borrowing when young is greater and saving when middle-aged is greater than when labour supply is fixed. Uncertainty causes individuals to work longer hours and to consume less when young. With flexibility over hours, accumulating precautionary assets incurs less of a utility cost and so the level of saving is greater. Further, allowing for flexibility and uncertainty means simulated hours of work and consumption more closely match the age profiles in the data.