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The Labor Supply Response to (Mismeasured but) Predictable Wage Changes

French, E; (2004) The Labor Supply Response to (Mismeasured but) Predictable Wage Changes. The Review of Economics and Statistics , 86 (2) pp. 602-613. 10.1162/003465304323031148. Green open access

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Abstract

Most panel data studies of intertemporal labor supply assume classical measurement error. Recent validation studies refute this assumption. In this study I address nonclassical measurement error explicitly. I use data on males from the Panel Study of Income Dynamics Validation Study to purge measurement error from the Panel Study of Income Dynamics. I find a large amount of predictable wage variation in the data, even after allowing for measurement error. However, there is almost no labor supply response to these predictable wage changes. Therefore, failure to control for nonclassical measurement error cannot explain the low estimated labor supply elasticities in other papers.

Type: Article
Title: The Labor Supply Response to (Mismeasured but) Predictable Wage Changes
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/003465304323031148
Publisher version: http://dx.doi.org/10.1162/003465304323031148
Language: English
Additional information: Copyright © 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology. Published in the Review of Economics and Statistics (http://www.mitpressjournals.org/loi/rest).
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1493285
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