Parallel Session IARIW 2014

1. Conspicuous work: Peer working time,
labour supply and happiness
Marion Collewet, Andries de Grip and Jaap de Koning
Maastricht University and Erasmus University Rotterdam
paper discussed by Sara Ayll´on (University of Girona)
IARIW 33rd General Conference
Rotterdam, 25th August 2014
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 1 / 13

2. Introduction
This paper studies to what extent peer working time relates to labour supply
and happiness for Dutch men
Data is from the Dutch CentER panel which collects individual information
on peers working time
Results are the outcome of OLS fixed-effects models but (plenty of)
robustness checks are carried out that confirm findings
Main results show that:
Men’s working time increases with the working time of their peers
Men who work longer hours than their peers are happier
Results are consistent with a “conspicuous work” model by which men
derive status from the amount of working time
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 2 / 13

3. Models of social interactions in labour supply
There are three main models that help explaining why men would want to
conform to their peers’ working time:
1 Externalities
2 Conformity
3 Status
1. Externalities →
According to the authors, “working alone or relaxing alone is arguably less
enjoyable than working or relaxing together with others”
Stiglitz (2008) argues that the marginal utility of leisure decreases when
others work more as it is more enjoyable to spend leisure time together
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 3 / 13

4. Models of social interactions with labour supply
2. Conformity →
Peer-working time can set a norm to which individuals want to conform
Akerlof and Kranton (2000)’s “identity utility” → an individual’s utility is
enhanced if he behaves as is expected from people (peers) in the social
category (workplace) he belongs to
3. Status →
Individuals derive status from the difference between their own labour supply
and that of others. How?
Conspicuous leisure → individuals can prove their status by showing
that they do not have to work so much
Conspicuous work → individuals signal their worth to others throught
working time. Increasing status by “I am very busy” or “I am busier
than you”
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 4 / 13

5. Previous empirical evidence
There is evidence of individuals conforming to the labour supply of people around
them. Peer labour supply has been found to have an influence on:
mothers’ labour market participation (Maurin and Moschion, 2009)
exit rates from welfare programmes (Van de Klaauw and Van Ours, 2003)
exit from unemployment (Topa, 2001)
effort provision of workers (Falk and Ichino, 2006)
In particular, as for the number of hours worked:
the desired number of hours worked for married women in the Netherlands is
influenced by the working time of a peer group (Woittiez and Kapteyn, 1998)
Similarly in Sweden for a reference group defined on the basis of age,
educational level and presence of children (Aronsson et al., 1999)
In the US, young men working hours have been found to depend on the
male employment rate in the neighbourhood (Weinberg et al., 2004). And
for married men, the influence is from a peer group based on proximity
(Grodner and Kniesner, 2008)
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 5 / 13

6. Previous empirical evidence
BUT, the estimation of peer effects has encountered (at least) two
methodological problems:
1 Need to make assumptions about the peer group. Most studies construct
the peer group based on demographic and/or geographic criteria but not on
who individuals consider to be their peer group (except Woittiez and
Kapteyn, 1998)
2 Need to distinghish between “effects caused by peer behaviour” from those
shared unobserved characteristics or common environmental factors
The authors take up both drawbacks by:
Using direct answers about peers working time
Using fixed-effects models that control for unobservables
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 6 / 13

7. Data
CentER data panel held since 1993 among Dutch households.
Sample: Men aged 23 to 60 with a positive weekly working time and if
working peers time is positive
On average, 44 years old, 1.11 children, 4 (out of 5) happy, 83% with a
partner
Individual weekly working time = usual hours + hours worked in second jobs
Peers working time is defined using the answers to the question “If you think
of the men among your acquaintances, how many hours per week do they
work on average?”
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 7 / 13

8. Results
Results from a fixed-effects model indicate that male peers working time is
positively related with own working time. Female peers working time is not
statistically significant
Results are robust to the inclusion of several variables (hourly wage,
non-earned income, hours worked by the individual’s partner, peer income...)
Robustness checks:
Peers one-year lagged value for working time reduces the main
coefficient but remains significant
Other peer characteristics have no significant influence
Comparison with results from OLS confirms that fixed-effects correct
for confounding factors
Similar results are found when actual hours worked are substituted for
“desired hours of work” → results are not driven by demand factors
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 8 / 13

9. Results
As for the results on happiness levels:
Authors find a U-shaped relationship between weekly working time and
happiness: men’s happiness is at the highest for a weekly working time of
around 50 hours
But, the inclusion of the interaction “own working time * peer working time”
is negative and statistically significant → the externalities hypothesis is not
confirmed (individuals do not enjoy working more the more their peers work)
The coefficient for “own working time - peer working time” is neither
significant → the conformity hypothesis is not confirmed (men do not
conform to their peers’ working time because of social norms)
The coefficient for male peers’ weekly hours is negative → the conspicuous
work hypothesis is confirmed (peers working time is negatively associated
with happiness)
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 9 / 13

10. Conclusions
A Dutch man works more hours the longer his male peers work
Peers’ labour supply is negatively associated with individuals’ happiness after
controlling for own working time, own income and peer income
A preference for status derived from work induces individuals to follow their
peers, without engaging in a rat race (because of the increasing marginal
costs of working more)
Results do not necessarily imply an increase in total hours worked because if
peers working time reduces, men are “allowed” to reduce their working time
without loosing status
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 10 / 13

11. DISCUSSION
This is a well-written (quite long) paper with conclusions on the effect of
peer working time on labour supply and happiness. It updates previous
papers from late 90’s and offers evidence for a conspicuous work model
Sample. 2 important selections → if individual weekly working time is
positive and if working peers time is positive. But also if information on
peer-related items is available (30% missing) and if peers’ income is available
(51% missing [imputed]). But also, if individual weekly working time < 72
hours and if peers weekly working time < 72 and if household income not in
the top or bottom 0.5% and if information on happiness is available...
Acquaintances may not be the same than working peers...
Use lag of own working time and not only lag of peers working time to
control for individual’s ’habit formation’
Further discussion on why female peers working time does not exert any
influence on males is needed
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 11 / 13

12. Minor comments
In the theoretical section, when discussing on ’Externalities’, previous
literature argues that the marginal utility of leisure decreases when others
work more. But, it does not necessarily imply that working alone is less
enjoyable for everybody...
Add controls in the main equation. So far only peer household income, age,
age square, number of children, partner and year dummies
Clearly indicate the period under analysis (from 1993 up to ?)
Too many tables and graphs in the Appendix. Perhaps, on-line Appendix
would be enough
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 12 / 13

13. Conspicuous work: Peer working time,
labour supply and happiness
Marion Collewet, Andries de Grip and Jaap de Koning
Maastricht University and Erasmus University Rotterdam
paper discussed by Sara Ayll´on (University of Girona)
IARIW 33rd General Conference
Rotterdam, 25th August 2014
Collewet, Grip & Koning (ROA & SEOR) IARIW 2014 25th August 2014 13 / 13