The Effect of Changes in Wages, GDP and Workers' Demographic Characteristics on Working Hours

Israel Economic Review, Vol. 7, No. 1, pp. 143-176, 2009

34 Pages Posted: 12 Aug 2009

See all articles by Adi Brender

Adi Brender

Bank of Israel - Research Department

Lior Gallo

Bank of Israel - Research Department

Date Written: 2009

Abstract

In this study we estimate the effect of changes in the employee's offered wage - which is influenced by macroeconomic developments and changes in tax rates - on working hours, accounting for changes in the employee's personal circumstances (family status and composition, entering or exiting school, reaching the pension age and spousal income and employment). We use repeat observations of workers in Israeli labor-force surveys to identify workers at more than one point in time. With the help of these data, we also examine whether the elasticities differ between population groups distinguished by demographic characteristics, schooling, employment characteristics in the first period and family income. The estimation shows that wage changes have little effect on working hours and, among full-time employees, have no effect at all. In contrast, working hours are quite elastic to changes in GDP. Among men, other than those from low-income families, this elasticity surpasses the elasticity in the extensive margin. Among women, working hours' elasticity to GDP growth is positive only among new entrants to the labor market, those approaching the retirement age, and those in low-wage occupations. However, in these groups - about one-third of working women - the elasticity was twice that found among men.

Keywords: Labor Supply, Working Hours, Gender Differences, Supply Elasticity

JEL Classification: J2, J16

Suggested Citation

Brender, Adi and Gallo, Lior, The Effect of Changes in Wages, GDP and Workers' Demographic Characteristics on Working Hours (2009). Israel Economic Review, Vol. 7, No. 1, pp. 143-176, 2009, Available at SSRN: https://ssrn.com/abstract=1447914

Adi Brender (Contact Author)

Bank of Israel - Research Department ( email )

PO Box 780
Jerusalem 91007
Israel
+972 2 655 2618 (Phone)
+972 2 655 2657 (Fax)

Lior Gallo

Bank of Israel - Research Department ( email )

PO Box 780
Jerusalem 91007
Israel

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