Effective Wage Differential Bundle Mechanism
RCTClinical Trial
Standard job postings bundle work hours and hourly rates together, making it difficult for economists to isolate a worker's willingness to supply an extra hour of labor without confounding total income or job tier changes.
Picture this
Imagine a fruit stand offering a small basket of 5 apples for $10 and a larger basket of 10 apples for $15; the true cost of those 5 additional apples isn't the average price per apple, but the $5 price difference divided by the 5 extra apples ($1 per extra apple).
What the evidence says
The logit intercept divided by the slope directly identifies the marginal value of time, proving that effective wage variation cleanly isolates willingness to supply incremental work hours without income effects.
- Who was studied
- N = 2,658 total job applicants across 80 U.S. metropolitan areas in a real hiring experiment for phone survey and data entry positions (83% female, mean age 33.6 years).
- How
- Discrete choice field experiment where job applicants select between two position descriptions differing by 5 weekly hours ($X$ vs $X+5$), with randomly assigned effective incremental wages $e_{ih} \in [\$0, \$28]$ evaluated via a logit discrete choice model.
What to do
Calculate effective marginal wages in discrete job offerings using the formula $e = \frac{h_2 w_2 - h_1 w_1}{h_2 - h_1}$ to isolate true hourly compensation for incremental work hours.
From the source
"We randomly varied the additional earnings an applicant would receive from working the longer job instead of the shorter job. Specifically, we define $e_{ih}$ as the additional earnings for each of the five extra hours in the longer job."
Labor_Supply_and_the_Value_of_Non_Work_Time_Experimental_Estimates.pdf