{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

LS08_handout

# LS08_handout - B3 Consider the following equation which...

This preview shows pages 1–2. Sign up to view the full content.

B3) Consider the following equation, which shows estimates from a model of the labour supply of 2825 married men in semi-skilled occupations in London and the South East. hours i = 29.977 – 0.012 Y i + 0.090 W i – 0.001 W i 2 (5.08) (3.68) (3.12) (2.04) + 7.801 K i + 10.281 Own i (3.82) (2.91) where numbers in brackets are (absolute) t-ratios and the following table gives details of the regression variables: Variable Name Description Mean value in Sample Hours Hours worked per week 33.00 Y Wife’s income (pounds per week) 120.44 W Wage (pounds per hour) 32.63 K Dummy variable = 1 if any children in household, 0 otherwise 0.58 Own Dummy variable = 1 if owner-occupier, 0 otherwise 0.72 a) Is there evidence of backward bending labour supply in this model? If so at what point does it occur? Suppose that you are told that the maximum wage in the sample is 40.05 £/week; would this affect your argument about whether there is evidence that at high wages hours decrease as the wage increases? b) What fraction of the sample have children? Construct a 95% confidence interval for the effect of children on hours worked. c) Can you reject the hypothesis that being an owner occupier has no effect on hours worked? d) Show that the elasticity of labour supply with respect to the wage depends on owner occupation in this empirical model. e) Write down the Slutsky equation and use it to calculate the substitution effect of a change in wages on hours worked for a home owner with no children at the sample means of wages and wife’s income. Does this satisfy the predictions of economic theory?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern