Testing intertemporal substitution, implicit contracts, and hours restriction models of the labor market using micro data

John Ham, Kevin T. Reilly

    Research output: Contribution to journalArticle

    Abstract

    We present new tests of three theories of the labor market: intertemporal substitution, hours restrictions, and implicit contracts. The intertemporal substitution test we implement is an exclusion test robust to many specification errors and we consistently reject this model. We model hours restrictions as part of an endogenous switching model. We compare the implicit probit equation to an unrestricted probit equation for unemployment and reject the hours restriction model. For the implicit contracts model, we estimate nonseparable within-period labor-supply and consumption equations. We test a cross-equation restriction of the model and cannot reject the implicit contracts model. (JEL E30, J22, J60).

    Original languageEnglish (US)
    Pages (from-to)905-927
    Number of pages23
    JournalAmerican Economic Review
    Volume92
    Issue number4
    DOIs
    StatePublished - Sep 1 2002

    Fingerprint

    Implicit contracts
    Intertemporal substitution
    Micro data
    Testing
    Labour market
    Probit
    Labor supply
    Specification error
    Switching models
    Exclusion
    Unemployment

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Testing intertemporal substitution, implicit contracts, and hours restriction models of the labor market using micro data. / Ham, John; Reilly, Kevin T.

    In: American Economic Review, Vol. 92, No. 4, 01.09.2002, p. 905-927.

    Research output: Contribution to journalArticle

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