Preferences for work and leisure: Is labor supply a function of what workers prefer?

Abstract

The assumption that utility maximization determines individual employment outcomes and labor supply is central to neoclassical labor market theory and inspired a whole culture of leisure literature, which links the supply of labor to individual preferences. In this study, we use data from the World and European Value Surveys to test whether individual preferences for work vs. leisure are related to employment outcomes. We employ a multilevel logit model to test this proposition at the extensive margin, i.e., the odds of a person being in employment, and the intensive margin, i.e., the supply of labor (full-time vs. part-time). We find that there is no relationship between individual preferences and employment odds, neither at the extensive nor at the intensive margin. The effects of average country-level work- leisure preferences are mixed. Overall, therefore, our study suggests that unemployment is an institutional issue, rather than an outcome of individual preferences.