Liquidity Constraints And Household Labor Supply

Human capital is an important and nontraded asset that households have.Liquidity constraints and household labor supply are also essential topics in the household finance research field.When demographic transition and economic transformation occur in China,decreased labor force caused by the slowdown in population growth,the aging population and the decline in total labor population,will have a negative impact on economic development.Labor shortage may become a bottleneck restricting economic development.Based on national condition and development needs of China,this dissertation addresses the question how liquidity constraints affect household labor supply,focusing on time allocation in labor supply and multiple jobs.This dissertation will also open the Black Box of intrahousehold decision making and investigate the impact of liquidity constraints of household heads on household members' labor supply.Based on the life cycle and permanent income theory,this dissertation identifies the constrained worker when a worker's current income is below its permanent level,describes the distribution and characteristics of constrained workers,and finds the percentage of constrained workers is 20.23%.This dissertation examines the impact of liquidity constraints on labor supply through theoretical and empirical models.Based on theoretical model analysis,this dissertation finds constrained workers will decrease their working hours of full-time jobs,and decrease the possibility of overtime,but increase their numbers of part-time jobs.Through the empirical model test,this dissertation finds liquidity constraints decrease the intensity in the supply of household labor on the full-time jobs.Constrained labors work,on average,3.50 hours less than their unconstrained counterpart on the full-time jobs.This dissertation also finds liquidity constraints significantly decrease the possibility of overtime for constrained labors,who will take more part-time jobs and work in household production activities to increase labor income and alleviate liquidity constraints.Based on collective household model,this dissertation finds that household members will increase the possibility of labor participation because of risk-sharing when household heads are contrained workers.Using micro survey data and empirical model,this dissertation examins impact of liquidity constraints of household heads on household members' labor participation.This dissertation finds that household members will increase the possibility of labor participation by 4.72%when household heads are liquidity constrained.And the possibility of self-employment will be increased by 6.29%when household heads are liquidity constrained.There are heterogenous effects in different member groups.Liquidity constraint of household heads could significantly increase the possibility of parents'labor participation,the possibility of spouse' self-employment,and the possibility of children' self-employment.As for time allocations of household members,this dissertation also finds the working hours of the full-time job of household members will be significantly reduced by 3.96 hours per week and the possibility of overtime is reduced by 24.82%,when household heads are liquidity constrained.It is supposed to find a path based on China' s realities to improve labor efficiency and optimize labor supply.It is also supposed to consider the factors that could affect household labor supply.Since household is the basic unit of the society,it will be helpful for policy making to understand the relationship between liquidity constraints and household labor supply.This dissertation addresses the question how liquidity constraints affect household labor supply,and also opens the Black Box of intrahousehold to investigate the impact of liquidity constraints of household heads on household members' labor supply.Hence,this dissertation sheds some light on relationship between liquidity constraints and household labor supply in China and will help the government to formulate labor supply policies,encourage household entrepreneurship and self-employment,release labor potential,and improve labor productivity.