Labour supply status and intertemporal behaviour: evidence from Spanish panel data

Abstract

In this paper, we estimated the intertemporal substitution for consumption and leisure in Spain. We used the standard intertemporal optimization consumption model with an intra-temporally separable utility function, using different population groups: employees, self-employed, unemployed, or retired people. Further, we analyse if the elasticity of intra-temporal substitution for leisure is affected by the individual labour status (temporary workers vs. fixed-term contract workers). For this purpose, we used the panel of the Spanish Survey on Household Finances (Encuesta Financiera de las Familias, SHF), covering the period 2002–2017. The results we obtain confirm that intertemporal substitution elasticities for both consumption and leisure are different depending on individuals' labour status and the labour contract's characteristics, such as the duration of the contract (temporary vs. fixed-term) or the degree of uncertainty about the future.

Keywords

• euler equation
• instrumental variables
• intertemporal substitution for consumption and leisure
• panel data