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Collective labour supply: heterogeneity and non-participation

Journal article | Review of Economic Studies

We present identification and estimation results for the "collective" model of labour supply in which there are discrete choices, censoring of hours, and non-participation in employment. We derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual "unitary" framework. Using the large changes in the wage structure between men and women in the U.K. over the last two decades, we estimate a collective labour supply model for married couples without children. The estimates of the sharing rule show that male wages and employment have a strong influence on bargaining power within couples.

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IFS Working Paper W98/20
In this paper we develop the collective labour supply framework to allow for corner solutions and nonparticipation in employment.