Hours and Wages

75 Pages Posted: 3 Feb 2020 Last revised: 8 Jul 2021

See all articles by Alexander Bick

Alexander Bick

Arizona State University (ASU) - Economics Department

Adam Blandin

Virginia Commonwealth University

Richard Rogerson

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER); Princeton University - Princeton School of Public and International Affairs

Date Written: January 2020

Abstract

We document two robust features of the cross-sectional distribution of usual weekly hours and hourly wages. First, usual weekly hours are heavily concentrated around 40 hours, while at the same time a substantial share of total hours come from individuals who work more than 50 hours. Second, mean hourly wages are non-monotonic across the usual hours distribution, with a peak at 50 hours. We develop and estimate a model of labor supply to account for these features. The novel feature of our model is that earnings are non-linear in hours, with the extent of nonlinearity varying over the hours distribution. Our estimates imply significant wage penalties for individuals that deviate from 40 hours in either direction, leading to a large mass of individuals that work 40 hours and are not very responsive to shocks. This has important implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous agent-incomplete markets model and for empirical strategies designed to estimate labor supply parameters.

Suggested Citation

Bick, Alexander and Blandin, Adam and Rogerson, Richard, Hours and Wages (January 2020). NBER Working Paper No. w26722, Available at SSRN: https://ssrn.com/abstract=3530693

Alexander Bick (Contact Author)

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

Adam Blandin

Virginia Commonwealth University ( email )

Richard Rogerson

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States
480-727-6671 (Phone)
602-965-0748 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

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