The Intertemporal-Substitution Hypothesis is Alive and Well (But Hiding in the Data)

According to the intertemporal-substitution hypothesis, which underlies the typical empirical real business cycle model, cyclical fluctuations in employment and hours of work are optimizing labor-supply responses to short-run aggregate demand shifts. We demonstrate that previous empirical labor-supply research has used inappropriate data to test the intertemporal-substitution hypothesis. We estimate a fixed-effects life-cycle labor-supply model with more informative data, the triannual micro data of the Survey of Income and Program Participation. We find economy-wide wage elasticities of employment and hours worked per employee of +1.55 and +0.51, which support the intertemporal-substitution hypothesis and give econometric credibility to the labor-market specification of empirical real business cycle models.intertemporal-substitution, cycle, Kneisner, Kimmel

Reducing the Welfare Dependence of Single-Mother Families: Health-Related Employment Barriers and Policy Responses

The problem of rising health care costs and the related increased dependency on health insurance coverage has moved to the forefront of the U.S. policy agenda in recent years and was a fundamental component of President Clinton's 1992 campaign platform. However, the President's 1994 health care reform proposal was unsuccessful, and current GOP proposals to cut the rate of growth of Medicare and Medicaid spending while the eligible population and costs both continue to grow fail to address the problem of coverage. In fact, one likely side effect of the cost-shifting to private insurance carriers will be to increase the ranks of the uninsured. This paper addresses one aspect of the coverage problem: specifically, how do the competing interests of public and private coverage for single mothers affect these mothers' willingness to participate in the labor market? And, how might restrictions concerning welfare eligibility currently undergoing legislative debate enter into the equation?single, mothers, Kimmel, Medicare, Medicaid, work

Child Care and the Employment Behavior of Single and Married Mothers

This paper examines the relationship between the cost of child care and the employment behavior of married and single mothers. The data used in this paper are from the 1987 SIPP, the first SIPP panel to utilize an improved probing of child care usage and expenditures. A primary contribution of this paper stems from the use of these improved child care data. A second contribution is to provide a clear comparison between single mothers and married mothers. A third contribution of this paper is its detailed discussion of participation elasticities, with a comparison of elasticities derived from different measures of the price of child care. This permits a meaningful comparison between the different child care price elasticities reported by different child care researchers in recent years. The paper's primary estimating equations examine the impact of changes in the market wage and the hourly price of child care on employment and hours of paid child care. The most fundamental result described in this paper is that increases in the market wage significantly increase the probability of labor force participation for married and single mothers, while increases in the price of care reduce the probability of labor force participation.child, care, employment, mothers, Kimmel

The Returns to Education and Basic Skills Training for Individuals with Poor Health or Disability

This paper examines linkages between disability and health status and the returns to education and basic skills training. It bases analyses on two separate data sources: wave 3 from the 1993 panel of the Survey of Income and Program Participation (SIPP) and the 1992 National Adult Literacy Survey (NALS). The data sets have been used to estimate standard wage equations with education and basic skills training among the independent variables. The NALS data set allows us to control for prose, quantitative, and document literacy. The wage equations rely on Heckit corrections for labor force participation, and we stratify by sex. We also estimate the wage equations stratifying by disability status (also with an appropriate econometric correction) to permit the coefficient estimates on all the regressors to vary by disability status. Overall, we find that the returns to education for individuals with a disability or poor health are positive, although of moderate size and equal to the returns for the nondisabled population. The findings suggest supply side policy options that maintain or improve access to and retention in educational opportunities are indicated. Basic skills training seems to be especially advantageous for some individual

Nonstandard Work and Child Care Choices of Married Mothers

The focus of this paper is to examine the interplay between nonstandard employment and child care choice decisions of married mothers with young children. We draw on the 1992/93 Survey of Income and Program Participation to estimate two related econometric models of child care choice that include the choice among center, sitter, relative and parental care. First, controlling for the potential endogeneity of the nonstandard work decision, we find that being a nonstandard worker significantly reduces the likelihood of using formal modes of child care such as center and sitter care. In our second model, where we jointly estimate the work status and child care choice decisions of mothers, we find that the standard versus nonstandard work decision is more responsive to the price of child care. Finally, we conclude the paper by discussing potential policy solutions to improve the child care options for mothers with young children working in nonstandard jobs.child care, part-time, temporary, mothers, Kimmel, Powell

The Returns to Education and Basic Skills Training for Individuals with Poor Health or Disability

This paper examines linkages between disability and health status and the returns to education and basic skills training. It bases analyses on two separate data sources: wave 3 from the 1993 panel of the Survey of Income and Program Participation (SIPP) and the 1992 National Adult Literacy Survey (NALS). The data sets have been used to estimate standard wage equations with education and basic skills training among the independent variables. The NALS data set allows us to control for prose, quantitative, and document literacy. The wage equations rely on Heckit corrections for labor force participation, and we stratify by sex. We also estimate the wage equations stratifying by disability status (also with an appropriate econometric correction) to permit the coefficient estimates on all the regressors to vary by disability status. Overall, we find that the returns to education for individuals with a disability or poor health are positive, although of moderate size and equal to the returns for the nondisabled population. The findings suggest supply side policy options that maintain or improve access to and retention in educational opportunities are indicated. Basic skills training seems to be especially advantageous for some individuals.disability, education, returns, Hollenbeck, Kimmel

Testing the Inverseness of Fertility and Labor Supply: The Case of Ethiopia

We test the inverseness of fertility and labor supply for married women in Ethiopia to determine if previous research (focusing on developed countries) that has found an inverse relationship between fertility and labor supply is applicable to least developed countries. The research into fertility and labor supply has relied on a variety of methodologies for addressing the endogeneity of fertility. Using data from the Demographic Health Survey (DHS) of Ethiopia, we use the husband's desire for children to instrument for fertility. Our empirical results fail to support an inverse relationship between fertility and labor supply in Ethiopia, perhaps because the persistence of traditional family structures in the face of rising national female employment facilitates maternal employment. This finding has implications for other LDCs as well.labor supply, fertililty

Moonlighting Behavior: Theory and Evidence

Two labor supply issues that have received substantial attention are the responsiveness of labor supply to wage changes and the imposition of labor supply constraints. Adjusting hours worked on a second job may be the practical and perhaps only available response to either event yet, most labor supply studies only examine behavior on the primary job. Examining the motives for moonlighting provides evidence on both the wage-responsiveness of labor supply in general and the existence and consequences of labor supply constraints. If, for instance, workers moonlight only when constrained on their primary jobs, then moonlighting itself implies that labor supply constraints exist and so supports the previous literature that incorporates these constraints (e.g. Hamm 1982, 1986). Regardless of the motive for moonlighting, allowing for potential labor supply adjustments on more than one job may very will alter the much-accepted conclusion regarding the inelasticity f male labor supply (for surveys, see Killingsworth 1983 or Pencavel 1986). By ignoring moonlighting behavior, researchers may be eliminating the most significant avenue for short term labor supply adjustments. Our research substantially improves the manner in which moonlighting is examined, and in so doing sheds new light on male labor supply elasticities. Specifically, we devise a theoretical model that permits different reasons for moonlighting and considers moonlighting in tandem with labor supply behavior on the primary job. Estimating both primary and secondary job hours equations using panel data from the SIPP (Survey of Income and Program Participation ) for prime-aged men, we find evidence that the decision to moonlight is quite responsive to wage changes (on both jobs) and arises from at least two distinct motives. Furthermore, properly modeling primary job hours constraints and differences in moonlighting motives reveals that the desired labor supply of prime-aged males is much more wage-elastic than typically assumed. Why do some people choose to moonlight? The predominant view is that it results from a constraint on hours worked on the primary job (Shishko and Rostker (1976), O'Connell (1979) and Krishnan (1990)). Due to workweek restrictions, economic conditions or other institutional factors, the worker is unable to work (or earn) as much as he or she desires on the primary job (PJ), and may thus consider taking a second job. The decision to moonlight hinges on a comparison between the reservation wage and the wage earned on a second job (SJ). The reservation wage and, there fore, the decision to moonlight will depend in part on the number of hours worked on the primary job. A major shortcoming of the aforementioned studies is the inclusion of (exogenous) primary job hours in moonlighting equations estimated for all workers (even non-moonlighters), many of whom may be unconstrained on their primary jobs. Indeed, estimating hours worked on the PJ as a choice variable is the purpose of a great many labor supply studies. To treat is as fixed and exogenous for all workers in inconsistent with basic economic theory and will likely lead to biased parameter estimates. Our econometric model corrects this misspecification and predicts which workers are constrained on their primary jobs. Another explanation for moonlighting behavior is that labor supplied to different jobs may not be perfect substitutes or, put differently, the age paid and utility lost form the foregone leisure may not completely reflect the benefits and costs to working. For example, working on the primary job may provide the worker with the credentials to take on a higher paying second job, such as a university professor who engages in consulting. Or, working on the second job may provide some pleasure (or less displeasure) but pay less than the primary job, such as a musician who has a "regular" job by day and performs at night. In either example, the costs and benefits of both jobs are more complex than the monetary wages paid and the forgone value of leisure. When faced with such nonpecuniary benefits and costs, optimizing behavior may lead a worker to take two jobs. Whereas Shishko and Rostker (1976) and others acknowledge that such a motive may exist, only Lilja (1991) explores it theoretically and empirically. Using Finnish data, the author finds evidence that this second motive better explains male moonlighting behavior that the first, more popular view. We build on Lilja's work by constructing a more consistent theoretical model and by explicitly modeling the behavior on the first job. Our research examines moonlighting behavior recognizing that workers may moonlight because of constraints on their primary jobs or because the two jobs are heterogeneous. We make no a priori assumptions regarding the existence of PJ constraints. We choose the SIPP data for our empirical analysis because it has detailed information on the second job that is superior to that available in other surveys (namely the panel Study of Income Dynamics, National Longitudinal Survey, and Current Population Survey), and it has a short (four month) survey period that permits us to better observe worker movements into and out of jobs. Cross-sectional data likely understate the true degree of moonlighting. In sum, our results help answer the questions of who moonlights and why, as well as provide new evidence of the wage-responsiveness of labor supply on both jobs and the prevalence of labor supply constraints.moonlighting, second, jobs, labor, Conway, Kimmel

Moonlighting over the Business Cycle

Using data from the 1979 National Longitudinal Survey of Youth, we examine the cyclicality of moonlighting by gender. We estimate a random effects Tobit model of moonlighting among working men and women and find that, while male moonlighting behavior does not fluctuate significantly with the business cycle, female moonlighting does. The cyclicality of female moonlighting has, nonetheless, varied over the course of the past 35 years. Female moonlighting seemed to behave counter-cyclically during much of the 1980s and early 1990s, confirming the popular media belief that moonlighting is more likely to occur during periods of economic distress. Yet, this counter-cyclical behavior disappears during the 1993-99 period to become pro-cyclical by the early twentieth century. The recent pro-cyclicality of female moonlighting supports the idea that female workers respond to a need for “just-in-time” employment following the economic upturn of the mid to late 1990s.

Who Moonlights and Why?: Evidence from the SIPP

Multiple job-holding is a significant characteristic of the labor market, with approximately 6 percent of all employed males reporting a second job in 1993 (Mishel and Bernstein, 1995, p. 226). Moonlighting reflects growing financial stress arising from declining earnings, as well as an increased need for flexibility to combine work and family. Approximately 40 percent of moonlighters report taking the second job due to economic hardship. Additionally, moonlighting is a reflection of the worker's choice to pursue entrepreneurial activities while maintaining the financial stability offered by the primary job. To restate in economic terminology, moonlighting arises from at least two distinct reasons. First, many individuals hold multiple jobs due to some sort of constraint on the primary job that limits that job's earnings capacity. Second, moonlighting may arise because the labor supplied to the two jobs are not perfect substitutes. That is, the wage paid and utility lost from the forgone leisure may not completely reflect the benefits and costs to working. For example, working on the primary job may provide the worker with the credentials to acquire a higher paying second job, such as a university psychologist testifying in a jury trial. Or, working on the second job may provide some satisfaction not received in the same amount or manner from the primary job, such as a comedian who has a "regular" job by day and performs at night. In either example, the costs and benefits of both jobs are more complex than the monetary wages paid and the forgone value of leisure. When faced with such nonpecuniary benefits and costs, optimizing behavior may lead a worker to take two jobs. In contrast to workers who moonlight because they are constrained on their primary jobs (PJ), we expect these kinds of moonlighters to moonlight for longer periods of time because optimizing behavior leads them to supply labor to more than one job, even in the long run. We might also expect to see smaller wage differences between jobs for such workers and the second job (SJ) wage could even be higher than the primary job wage in some situations. Previous research on moonlighting, including Shishko and Rostker (1976), O'Connell (1979) and Krishnan (1990), acknowledges that multiple motives may exist but focuses only on the constraint motive. In related studies, Paxson and Sicherman (1994) explore moonlighting as an alternative avenue for adjusting short-run labor supply, and Abdukadir (1992) examines the possibility that moonlighting is caused by short-term liquidity constraints. Another possible motivation for moonlighting is that certain types of job situations present greater opportunities for tax evasion. Plewes and Stinson (1991) provide survey evidence from the 1989 Current Population Survey of the many distinct reasons for moonlighting reported by workers. The only research in the moonlighting literature that models the joint motives for moonlighting correctly while controlling for the endogeneity of primary job hours are Lilja (1991) and Conway and Kimmel (1994). The latter improves upon Lilja (1991) by specifying a more plausible utility maximizing model and developing a superior instrument for PJ hours. This research examines the characteristics of moonlighters and the length of their moonlighting episodes with the goal of understanding who moonlights and why. The data are for prime-aged men and are drawn from the 1984 Survey of Income and Program Participation (SIPP) panel. The primary advantages of the SIPP are the detailed information provided on up to two jobs (including job start and end dates) and the relatively short length of time (four months) covered by each interview of the survey. Both of these qualities make it possible to identify brief (as well as long) periods of moonlighting, movements into and out of jobs, and the characteristics associated with each job. Because moonlighting may be motivated by short-term financial needs, being able to observe short moonlighting durations is important. We begin by studying the personal and job-related characteristics of moonlighters and how the length of the moonlighting episode varies with these characteristics. We then estimate a duration model with unobserved heterogeneity to identify formally the determinants of moonlighting behavior when multiple motives may exist. Our expectation is that individuals who moonlight because they are constrained on their primary jobs might do so for shorter periods than those who are "job-packaging." Therefore, the hazard rate for workers who moonlight because of primary job constraints should be greater than for those with alternative motives, ceteris paribus. The mixed hazard function will vary as the composition of the sample changes with the duration of the moonlighting episode. By exploring the importance of heterogeneity and the direction of duration dependence of the mixed and structural hazard functions, we gain new insights into the determinants of moonlighting behavior. The descriptive analyses reveal that most moonlighters in our sample work full-time on their primary jobs and 15 to 20 hours a week on lower paying second jobs, and, in spite of those long hours, tend to be poorer than the average worker. Yet, a significant minority earns a higher wage on their second job. Our duration model results suggest that the structural hazard increases over time and there is significant unobserved heterogeneity. Taken together, these results are consistent with the presence of multiple motives for moonlighting, with the constraint motive being the most common.moonlighting, jobs, Kimmel, Conway