Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labor Supply | Zendy

Luigi Pistaferri | Zendy

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Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labor Supply

Author(s) -

Luigi Pistaferri

Publication year - 2003

Publication title -

journal of labor economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 8.184

H-Index - 109

eISSN - 1537-5307

pISSN - 0734-306X

DOI - 10.1086/374965

Subject(s) - economics , wage , wage growth , labour economics , efficiency wage , panel study of income dynamics , wage share

In this article, I estimate how labor supply responds to anticipated wage growth, unanticipated wage growth, and wage risk using the 1989–93 panel section of the Bank of Italy Survey of Households' Income and Wealth (SHIW), which collects individual expectations of future wages. The use of subjective expectations has several advantages. First, they provide information on the evolution and riskiness of future wages that the econometrician may never hope to observe. Moreover, this avoids the need for specifying instruments for the growth rate of wages. Finally, forecast errors can be directly controlled for, thus avoiding inconsistency in short panels.

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