Most panel data studies of intertemporal labor supply assume classical measurement error. Recent validation studies refute this assumption. In this study I address nonclassical measurement error explicitly. I use data on males from the Panel Study of Income Dynamics Validation Study to purge measurement error from the Panel Study of Income Dynamics. I find a large amount of predictable wage variation in the data, even after allowing for measurement error. However, there is almost no labor supply response to these predictable wage changes. Therefore, failure to control for nonclassical measurement error cannot explain the low estimated labor supply elasticities in other papers.
Authors
CPP Co-Director
Eric is the Montague Burton Professor of Industrial Relations and Labour Economics at the University of Cambridge and Professor of Economics at UCL.
Journal article details
- DOI
- 10.1162/003465304323031148
- Publisher
- The MIT Press Journals
- Issue
- Volume 86, Issue 2, March 2006, pages 602-613
Suggested citation
French, E. (2006). 'The Labor Supply Response to (Mismeasured but) Predictable Wage Changes' 86, Issue 2(2006), pp.602–613.
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