| Abstract: |
Traditional labor supply analysis is based on the assumption that workers only
have preferences over consumption and hours of work, and are able to choose
consumption and hours freely within the budget constraint. Recently, various
discrete choice versions of the traditional approach (with discrete hours)
have become popular, but the basic assumption above is still maintained.
Neither of these two approaches allows for agents’preferences over qualitative
job-specific or choice restrictions facing the agents in the labor market in
terms of restricted choice sets of job opportunities. In this paper we argue
for an alternative modeling framework that differs from the standard models of
labor supply in that the notion of job choice is fundamental. Specifically,
the worker is assumed to have preferences over a latent worker-specific choice
set of jobs from which he chooses his preferred job. A job is characterized
with fixed (job-specific) working hours, wage rate and non-pecuniary
attributes. As a result, observed hours of work and wage rate are interpreted
as the job-specific (fixed) hours of work and wage rate associated with the
chosen job. The discussion in this paper focuses on interpretation of
different versions and extensions of the alternative framework, theoretical
and practical advantages, and how this approach relates to familiar existing
approaches in the literature. |