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Labour Supply as a Buffer: Evidence from UK Households
Author(s) -
Benito Andrew,
Saleheen Jumana
Publication year - 2013
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12030
Subject(s) - margin (machine learning) , shock (circulatory) , labour supply , work (physics) , economics , labour economics , propensity score matching , monetary economics , demographic economics , business , medicine , mechanical engineering , statistics , mathematics , machine learning , computer science , engineering
This paper examines how individuals use their labour supply—hours of work and participation decisions—as a margin of adjustment or ‘buffer’ in response to financial shocks. The financial shock measure is constructed using individuals' expected change to their financial situation in the year ahead relative to the perceived outcome one year later. Using BHPS data, we find that both men and women adjust their labour supply in response to financial shocks. The propensity to participate in the labour market also appears to respond to the experience of a financial shock, but is less robust.