Choice among Wage-Hours Packages: An Empirical Investigation of Male Labor Supply

Abstract

This article specifies and estimates an empirical model of male labor supply based on an implicit market model of wage-hours determination. We discuss how moving from a standard labor supply model to an implicit market model affects model specification and choice of estimation technique. We find that average hourly earnings are not independent of hours worked and that OLS estimates of the wage-hours relationship are biased. We also show that a labor supply model that assumes wages to be independent of hours worked produces a positively biased estimate of the effect of the wage on labor supply