Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications

38 Pages Posted: 28 Sep 2007

See all articles by Andrew Grodner

Andrew Grodner

East Carolina University - Department of Economics

Thomas J. Kniesner

Claremont Graduate University - Department of Economic Sciences; Syracuse University - Department of Economics; IZA

Multiple version iconThere are 2 versions of this paper

Date Written: September 2007

Abstract

Our econometric research allows for a possible response of a person's hours worked to hours typically worked by members of a multidimensional labor market reference group that considers demographics and geographic location. Instrumental variables estimates of the canonical labor supply model expanded to permit social interactions pass a battery of specification checks and indicate positive and economically important spillovers for adult men. Ignoring or incorrectly considering social interactions in male labor supply can mis-estimate the response to tax reform by as much as 60 percent.

Keywords: labor supply, social interactions, reference group, instrumental variables, social multiplier, PSID

JEL Classification: J22, Z13

Suggested Citation

Grodner, Andrew and Kniesner, Thomas J., Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications (September 2007). IZA Discussion Paper No. 3034. Available at SSRN: https://ssrn.com/abstract=1017528

Andrew Grodner

East Carolina University - Department of Economics ( email )

A423 Brewster Building
Greenville, NC 27858
United States
2523286742 (Phone)

Thomas J. Kniesner (Contact Author)

Claremont Graduate University - Department of Economic Sciences ( email )

Claremont, CA 91711
United States

Syracuse University - Department of Economics ( email )

Syracuse, NY 13244-1020
United States

IZA

P.O. Box 7240
Bonn, D-53072
Germany

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