ABSTRACT
This chapter analyses labour participation decisions, as well as the relationship between wage changes and hours worked by calculating the uncompensated elasticity for men and women separately, paying special attention to the evolution of the determinants of the labour supply. The relevance of this analysis is related to the characteristics of the labour supply and its evolution, which may help to explain certain imbalances in labour markets as well as assess the effects of economic policies. The analysis of the labour supply based on cross–sectional data often uses a traditional static function that considers the income effect and the uncompensated impact of the wage increase. The relationship between hours worked and wages is analysed through 'uncompensated elasticity', assuming that paid labour supply decisions taken by an individual are taken in the present. The chapter provides the exclusion restriction in estimating uncompensated elasticity by the non–inclusion of education as an explanatory variable in the supply equation.
