The Effects of Hours Constraints on Labor Supply Estimates

Shulamit Kahn, Kevin Lang

NBER Working Paper No. 2647
Issued in July 1988
NBER Program(s):   LS

Almost all labor supply models are estimated under the assumption that workers are free to choose their hours. However, theory, casual empiricism and survey data suggest that many workers are not free to vary the hours within a job. Consequently, labor supply estimates based on actual hours of work may be biased. Using Canadian data on desired hours of work, we find that using actual hours causes labor supply estimates to be biased upwards but the bias is small.

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Published: Review of Economics and Statistics, Vol. 73, no. 4 (1991): 605-611.

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