An
Intergenerational Model of Wages, Hours, and Earnings
Joseph
G. Altonji and Thomas A. Dunn
Abstract
We develop and estimate a factor model of the earnings,
labor supply, and wages of young men and young women, their parents,
and their siblings. We estimate the model using data on matched
sibling and parent-child pairs from the National Longitudinal Survey
of Labor Market Experience. We measure the extent to which a set
of unobserved parental and family factors that drive wage rates
and work hours independently of wage rates lead to similarities
among family members in labor market outcomes.
We find strong family similarities in work hours that
run along gender lines. These similarities are primarily due to
preferences rather than to labor supply responses to family similarities
in wages. The wage factors of the father and mother influence the
wages of both sons and daughters. A "sibling" wage factor
also plays an important role in wage determination. We find that
intergenerational correlations in wages substantially overestimate
the direct influence of fathers and, especially, mothers on wages.
This is because the father's and mother's wage factors are positively
correlated. The relative importance for the variance in earnings
of the direct effect of wages, the labor supply response induced
by wages, and the effect of hours preferences varies by gender,
and by age in the case of women. For all groups most of the effect
of wages on earnings is direct rather than through a labor supply
response.
Joseph G. Altonji, Department
of Economics, Northwestern University Thomas A. Dunn, Department of Economics, Syracuse
University
To Order:
Hard copies of IPR working papers cost $5.00 each (international orders are $10 each). We only accept checks drawn on U.S. bank and payable in U.S. funds. Checks or
money orders should be made payable to Northwestern University and sent to
the following address:
Publications Department - WP Orders
Institute for Policy Research
2040 Sheridan Rd., Evanston, IL 60208-4100.
For information, call 847-491-8712 or email ipr@northwestern.edu.
Please note that we do not accept credit cards.
