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Title: Asset Adjustments and Labor Supply of Older Workers
Resulting in 1 citation.
1. Fleisher, Belton M.
Parsons, Donald O.
Porter, Richard D.
Asset Adjustments and Labor Supply of Older Workers
In: Income Maintenance and Labor Supply-Econometric Studies. G. Cain, et. al., eds.Madison, WI: Institute for Research on Poverty, University of Wisconsin - Madison, 1973
Cohort(s): Older Men
Publisher: Institute for Research on Poverty (IRP), University of Wisconsin - Madison
Keyword(s): Assets; Behavior; Income Dynamics/Shocks; Labor Supply

Permission to reprint the abstract has not been received from the publisher.

This paper focuses on the hypothesis that empirical research on labor supply, with reference to males in the age group where work is the normal mode of behavior, has suffered from the lack of an adequate formulation of the role of nonemployment sources of purchasing power in affecting labor-supply decisions. Recent extensions of the classical labor-supply model, that have proved fruitful in increasing understanding of the behavior of other groups in the work force, appear to be of little help in understanding the behavior of older primary workers--males between ages 45-59. This paper concentrates on the role of nonhuman assets and nonemployment income in the labor supply function of older workers. The authors present the derivation and empirical estimation of two variants of an asset-adjustment model of labor supply and develop a system of labor-supply equations in which hours of work for an individual are determined by wage rate and the difference between the actual and desired stock of nonhuman assets. The value of assets conditions work decisions principally relative to some desired asset level rather than through its level alone. A large number of the regressions yielded estimates of the labor-supply parameters that are quite plausible. In many of the regressions, the internal consistency is quite good. However, in the more complex model, in which the authors attempt to incorporate transitory wage effects as well, the results appear suspect. The major empirical problem uncovered in this study is the high sensitivity of labor supply estimates to different definitions of a given variable and to different sample compositions. This may be a characteristic of male workers in this age group, 45 to 59, because more traditional models suffer from the same problem. The results imply that dynamic aspects of asset adjustments cannot be ignored. Because the expected time path of supply responses depends critically on the asset value of the NIT program, one must conclude the inferences drawn from experimental short-term programs are likely to underestimate the impact on labor supply.
Bibliography Citation
Fleisher, Belton M., Donald O. Parsons and Richard D. Porter. "Asset Adjustments and Labor Supply of Older Workers" In: Income Maintenance and Labor Supply-Econometric Studies. G. Cain, et. al., eds.Madison, WI: Institute for Research on Poverty, University of Wisconsin - Madison, 1973