overhaa.blogg.se - Importance of labour supply

2011). We use data from Consumer Expenditure Survey (CEX) for the years 1980-2012. Importantly, we follow recent contributions that have stressed the distinction between changes in labour supply at the extensive (participation) and the intensive (hours) margins to understand the aggregate response of labour supply (Chetty et al. Our specification of utility is flexible, and allows for different degrees of substitutability between consumption and leisure, intertemporal substitutability, and a rich role for demographic and other variables. To do so, we use a life-cycle model in which unitary households make choices about consumption and women’s labour supply, given exogenous processes for male earnings and female wages. 2018), we study women’s labour supply in the US using an integrated approach to estimate within-period and intertemporal preference parameters, and to map those parameters into the different concepts of elasticity. The Frisch elasticity is the right concept to discuss the impact of business cycle fluctuations in wages.Īn integrated approach to estimating elasticities This measures variation in labour supply due to anticipated change in the wage. The life-cycle Hicksian elasticity is the right concept to discuss the impact of a funded change in the tax system that does not change the distribution of resources across individuals. This measures the change due to the same change in the entire life-cycle wage profile, but after netting off the extra resources from the lifetime budget constraint.

This measures the change in hours worked and participation due to a change in the entire life-cycle wage profile.

The life-cycle Marshallian elasticity.

In a dynamic context, there are three different elasticity concepts that are relevant: Is it anticipated or unanticipated, temporary or permanent? Different types of variation generate different types of response, as argued by Blundell and MaCurdy (1999), among others. In this debate being precise about the type of wage variation that induces a labour supply response is key. It is not possible to think about labour supply elasticity as a unique structural parameter.

Labour economists estimate small labour supply elasticities from individual level data, while macroeconomists, who use business cycle fluctuations of wages and hours, argue that labour supply elasticities are considerably larger.1Įconomists mostly have not, however, attempted to understand the pervasive and complex heterogeneity of labour supply, and the issues that this raises when we estimate aggregate effects.2 In this column we show there is substantial heterogeneity in women’s labour supply elasticities in cross section, and also over the business cycle.

For a long time economists have disagreed on how much hours of work and labour market participation rates respond to changes in wages.