Labor supply and consumption smoothing when income shocks are non-insurable

Arbeitspapier

The paper investigates how employees use secondary employment to smooth out consumption shortfalls from non-anticipated wage shocks in their main employment. The identification strategy exploits surprising changes in firms' wage payment and repayment behavior in Ukraine. Based on unique nationally representative panel data, the econometric approach accounts for workers' unobserved heterogeneity and measurement error in the wage shock information. The estimated labor supply responses suggest that secondary activities are used as temporary coping strategies against wage shocks and that they closely follow the lifecycle of wage arrears. Households that engage in secondary employment can successfully smooth their consumption. The results are robust to several alternative hypotheses concerning the observed labor supply pattern.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 5499

Classification and Topics

• Classification: Wirtschaft ; Time Allocation and Labor Supply ; Compensation Packages; Payment Methods ; Socialist Institutions and Their Transitions: Consumer Economics; Health; Education and Training: Welfare, Income, Wealth, and Poverty ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
• Subject: dual job holding ; wage shock ; consumption smoothing ; subsidiary farming ; reaction time to shocks ; Arbeitsangebot ; Nebentätigkeit ; Lohn ; Schock ; Einkommen ; Schätzung ; Ukraine

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Danzer, Alexander M.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/51692
• URN: urn:nbn:de:101:1-201104113724
• Last update: 10.03.2025, 11:44 AM CET