SSE/EFI Working Paper Series in Economics and Finance
Labor Supply and Saving under Uncertainty
Abstract: This paper examines how variations in labor supply can be
used to self-insure against wage uncertainty, and the impact of such
self-insurance on precautionary saving. The analytical framework is a
two-period model with saving and labor-supply decisions where preferences
are consistent with balanced growth. The main findings are that (i)
labor-supply flexibility raises precautionary saving when future wages are
uncertain, and (ii) uncertainty about future wages raises current labor
supply and reduces future labor supply.
Keywords: precautionary saving; prudence; labor supply; (follow links to similar papers)
JEL-Codes: D81; E21; (follow links to similar papers)
19 pages, April 22, 2005
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Full text versions of the paper:
- This paper is published as:
Floden, Martin, (2006), 'Labor Supply and Saving under Uncertainty', Economic Journal, Vol. 116, pages 721-737
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