ICT and Substitution Between Out-of-Home and at-Home Work: The Importance of Timing

Abstract

This paper investigates the determinants of at-home and out-of-home labor supply in the Netherlands in the 1990s, focusing on the presence of information and computer technology (ICT) in households—in particular modem possession. To investigate these determinants, a sequential hurdle model is estimated in which people first decide to work and then decide to divide total labor supply in at-home and out-of-home labor supply. To correct for possible endogeneity, the modem variable is estimated by means of instrumental variables. When we consider only office hours, possession of ICT facilities at home stimulates both at-home and out-of-home labor supply. Thus, the two may be called complements from the ICT perspective. However, outside office hours, modem possession leads to less work out of home. During this part of the day the time worked less on the job is partly substituted by work at home. Thus, during this part of the week we find that substitution dominates. However, because labor supply during office hours dominates labor supply during the rest of the week we find complementarity as the main feature of overall labor supply. These results underline the importance of timing issues.