Aggregation and labor supply elasticities
- Author(s)
- Alois Kneip, Monika Merz, Lidia Storjohann
- Abstract
We outline a formal procedure for deriving the aggregate wage-elasticity of labor supply for a large group of heterogeneous workers who operate under uncertainty. Heterogeneity relates to preferences, income, wealth, and the labor market status. If each worker faces a small, possibly nonuniform wage change, the implied aggregate wage-elasticity can be represented by a closed-form expression. This expression captures an extensive and an intensive margin. We empirically implement the procedure for a dynamic model of individual labor supply and a micro panel of men in Germany from 2000 to 2013. We find that the extensive margin is less time-varying than the intensive margin, and that its size varies with the measure of reservation wages. Self-reported reservation wages render a larger extensive margin than other proxies. The estimated aggregate Frisch wage-elasticity varies between 0.85 and 1.06, and the two margins matter equally strongly for the unbalanced sample.
- Organisation(s)
- Department of Economics
- External organisation(s)
- Rheinische Friedrich-Wilhelms-Universität Bonn
- Journal
- Journal of the European Economic Association
- Volume
- 18
- Pages
- 2315-2358
- No. of pages
- 44
- ISSN
- 1542-4766
- DOI
- https://doi.org/10.1093/jeea/jvz039
- Publication date
- 09-2019
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502053 Economics, 502018 Macroeconomics
- Keywords
- ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/aggregation-and-labor-supply-elasticities(3e51d025-9bb0-4ca8-bb0e-04f4299273b6).html