How important is precautionary labor supply?

Arbeitspapier

We quantify the importance of precautionary labor supply using data from the German Socio- Economic Panel (SOEP) for 2001-2012. We estimate dynamic labor supply equations augmented with a measure of wage risk. Our results show that married men choose about 2.5% of their hours of work or one week per year on average to shield against unpredictable wage shocks. This implies that about 26% of precautionary savings are due to precautionary labor supply. If self-employed faced the same wage risk as the median civil servant, their hours of work would reduce by 4%.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge ; No. 2016/10

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Time Allocation and Labor Supply ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
• Subject: wage risk ; labor supply ; precautionary saving ; life cycle ; dynamic panel data

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jessen, Robin ; Rostam-Afschar, Davud ; Schmitz, Sebastian
• Event: Veröffentlichung
• (who): Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft
• (where): Berlin
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/142123
• Last update: 10.03.2025, 11:42 AM CET