Abstract
At the aggregate level, the labor supply elasticity can significantly depart from the micro elasticity. In an economy where households make decisions on the labor market participation, the slope of the aggregate labor supply curve is determined by the distribution of reservation wages rather than by the willingness to substitute leisure intertemporally. We present a model economy where earnings and wealth distributions are comparable to those in the micro data. We find that the aggregate labor supply elasticity of such an economy is around 1, which is greater than the typical micro estimates but smaller than those often assumed in the aggregate models. Our model also sheds some light on the recent debate on the failure of the representative agent model.
| Original language | English |
|---|---|
| Pages (from-to) | 275-293 |
| Number of pages | 19 |
| Journal | Global Economic Review |
| Volume | 45 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2016 Jul 2 |
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All Science Journal Classification (ASJC) codes
- Business and International Management
- Economics, Econometrics and Finance(all)
- Political Science and International Relations
Cite this
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On the Aggregate Labor Supply : A Progress Report. / Chang, Yong Sung; Kim, Sun Bin.
In: Global Economic Review, Vol. 45, No. 3, 02.07.2016, p. 275-293.Research output: Contribution to journal › Article
TY - JOUR
T1 - On the Aggregate Labor Supply
T2 - A Progress Report
AU - Chang, Yong Sung
AU - Kim, Sun Bin
PY - 2016/7/2
Y1 - 2016/7/2
N2 - At the aggregate level, the labor supply elasticity can significantly depart from the micro elasticity. In an economy where households make decisions on the labor market participation, the slope of the aggregate labor supply curve is determined by the distribution of reservation wages rather than by the willingness to substitute leisure intertemporally. We present a model economy where earnings and wealth distributions are comparable to those in the micro data. We find that the aggregate labor supply elasticity of such an economy is around 1, which is greater than the typical micro estimates but smaller than those often assumed in the aggregate models. Our model also sheds some light on the recent debate on the failure of the representative agent model.
AB - At the aggregate level, the labor supply elasticity can significantly depart from the micro elasticity. In an economy where households make decisions on the labor market participation, the slope of the aggregate labor supply curve is determined by the distribution of reservation wages rather than by the willingness to substitute leisure intertemporally. We present a model economy where earnings and wealth distributions are comparable to those in the micro data. We find that the aggregate labor supply elasticity of such an economy is around 1, which is greater than the typical micro estimates but smaller than those often assumed in the aggregate models. Our model also sheds some light on the recent debate on the failure of the representative agent model.
UR - http://www.scopus.com/inward/record.url?scp=84979584000&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84979584000&partnerID=8YFLogxK
U2 - 10.1080/1226508X.2016.1211813
DO - 10.1080/1226508X.2016.1211813
M3 - Article
VL - 45
SP - 275
EP - 293
JO - Global Economic Review
JF - Global Economic Review
SN - 1226-508X
IS - 3
ER -