WAGES AND HOURS OF WORK OF ELDERLY MEN

THIS PAPER DEVELOPS AND APPLIES A SIMPLE SCHEME TO ESTIMATE SIMULTANEOUSLY THE PARAMETERS OF MARKET WAGE FUNCTIONS THAT DEPEND ON HOURS OF WORK AND HOURS FUNCTIONS THAT DEPEND ON MARGINAL WAGES. IF MARGINAL WAGE RATES DO NOT EQUAL AVERAGE WAGE RATES, LABOR SUPPLY CURVES ARE NOT WELL DEFINED. HOWEVER, THE RELEVANT PARAMETERS FOR TIME ALLOCATION MAY BE IDENTIFIED AND ESTIMATED. THE BASIC STRUCTURE OF THE MODEL INVOLVES THE MARGINAL VALUE OF TIME EQUATIONS FOR BOTH WORK AND NONWORK ACTIVITIES. A VIRTUE OF THE APPROACH IS THAT IT IS CONCEPTUALLY STRAIGHTFORWARD USING LEAST SQUARES ESTIMATION TECHNIQUES. THE ELDERLY ARE A PARTICULARLY INTERESTING GROUP TO CONSIDER BECAUSE OF THEIR PROPENSITY TO REDUCE HOURS OF WORK WITH ADVANCING AGE. A FINDING THAT REDUCTIONS IN HOURS SIGNIFICANTLY REDUCE THE WAGE MAY HELP TO EXPLAIN WHY MANY PERSONS GO FROM FULL TIME WORK TO ZERO HOURS INSTEAD OF GRADUALLY REDUCING HOURS AS PREDICTED BY LIFECYCLE THEORIES.