The sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics, the analysis of social security and pensions, and the study of life-cycle patterns of work. This paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature. The first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation. The second approach is to estimate a first-difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations. The results indicate that intertemporal substitution elasticity for married men is positive but small.

This article treats education as a sequential choice that is made under uncertainty. A simple model is used to explore the effects of ability, high school preparation, preferences for schooling, the borrowing rate, and ex post payoffs to college on the probability of various post-secondary college outcomes and the ex ante return to starting college. The model motivates an empirical method of accounting for uncertainty about educational outcomes and for nonlinearity in the relationship between years of education and earnings when estimating the expected return to the first year of college.

The paper uses two approaches to study whether aggregate fluctuations in employment and unemployment may be explained within a market clearing framework as intertemporal substitution in labour supply. First, log-linear equations for labour supply and unemployment are estimated using a forecasting model to measure wage and price expectations. Second, a utility function is used to derive and estimate an equation for labour supply as a function of the current real wage and consumption. The influence of expected future real wages and interest rates is captured by the consumption variable. The empirical results do not support the intertemporal substitution model.

I examine the implications of employer learning and statistical discrimination for initial employment rates, wages, and occupational attainment and for wage growth and occupational change over a career using a model in which the sensitivity of productivity to worker skill is increasing in the skill requirements of the job and in which employers learn about worker skill more rapidly in high skill jobs. I show that statistical discrimination influences initial employment rates, wage levels and job type, and that employers' initial estimate of productivity influences wage growth even in an environment in which access to training is not an issue. The implication is that the market may be slow to learn that a worker is highly skilled if worker's best early job opportunity given the information available to employers is a low skill level job that reveals little about the worker's talent.

The sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics, the analysis of social security and pensions, and the study of life-cycle patterns of work. This paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature. The first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation. The second approach is to estimate a first-difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations. The results indicate that intertemporal substitution elasticity for married men is positive but small.

This article investigates the effect of external, national, and sectoral shocks on Canadian employment fluctuations at the national, industrial, and provincial levels. We assume that employment growth in each industry-province pair depends on U.S. growth, lagged Canadian growth at the national, industrial, and provincial levels, an aggregate shock, and shocks specific to each industry, province, and industry-province pair. We estimate that the U.s. and Canadian shocks account for two-thirds and a quarter, respectively, of aggregate variation. Sectoral shocks account for only one-tenth of aggregate variation but represent 30% of the variation from Canadian sources.

In a labor market with tied hours-wage packages and wage dispersion for a particular type of job, constrained workers may be willing to sacrifice wage gains for better hours when changing jobs. Likewise, workers may accept jobs offering undesirable hours only if the associated wage gains are large. We investigate this issue empirically by examining whether overemployment and underemployment on the initial and new job affects the relation between hours changes and wage changes for quitters. Our results generally support the view that an individual requires compensation to work in a job that, given the individual's particular preferences, offers unattractive hours.

This paper uses Panel Study of Income Dynamics data on parents and their adult children to test the standard altruism model. This model predicts that, within the extended family, the distribution of consumption is independent of the distribution of resources. Our findings strongly reject this prediction.

This paper tests the rational expectations lifecycle model of consumption against (i) a Keynesian model and (ii) the rational expectations lifecycle model with imperfect capital markets. The tests are based upon the relative responsiveness of consumption to income changes that can be predicted from past information and income changes that cannot be predicted. The tests allow for measurement error in income. The results reject the Keynesian model and generally support the lifecycle model. But the results are not sufficiently precise to rule out the possibility that some households are liquidity constrained. Measurement error has a strong influence on the relationship between consumption and income.

In this paper, we use indirect inference to estimate a joint model of earnings, employment, job changes, wage rates, and work hours over a career. We use the model to address a number of important questions in labor economics, including the source of the experience profile of wages, the response of job changes to outside wage offers, and the effects of seniority on job changes. We also study the dynamic response of wage rates, hours, and earnings to various shocks, and measure the relative contributions of the shocks to the variance of earnings in a given year and over a lifetime. We find that human capital accounts for most of the growth of earnings over a career, although job seniority and job mobility also play significant roles. Unemployment shocks have a large impact on earnings in the short run, as well as a substantial long-term effect that operates through the wage rate. Shocks associated with job changes and unemployment make a large contribution to the variance of career earnings and operate mostly through the job-specific error components of wages and hours.