Labour Supply as a Buffer: Evidence from UK Households

36 Pages Posted: 5 May 2012

See all articles by Andrew Benito

Andrew Benito

Bank of England - Domestic Finance Division

Jumana Saleheen

Bank of England

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Abstract

This paper examines labour supply adjustment – both hours worked and participation decisions. We focus on the response of each to financial shocks, employing data from the BHPS. Estimated responses are broadly consistent with models of self-insurance that incorporate labour supply flexibility. The shock reflects several factors including financial wealth and a partner's employment situation. The response is significantly larger for those who change job, consistent with the importance of hours constraints within jobs. The propensity to participate in the labour market also appears to respond to the financial shock but that is somewhat less robust than the hours response.

Keywords: labour supply, self-insurance

JEL Classification: J22

Suggested Citation

Benito, Andrew and Saleheen, Jumana, Labour Supply as a Buffer: Evidence from UK Households. IZA Discussion Paper No. 6506, Available at SSRN: https://ssrn.com/abstract=2051309

Andrew Benito (Contact Author)

Bank of England - Domestic Finance Division ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom
020 7601 5212 (Phone)

Jumana Saleheen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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