On the Aggregate Labor Supply: A Progress Report

Yongsung Chang, Sun Bin Kim

Research output: Contribution to journalArticle

2 Citations (Scopus)

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 languageEnglish
Pages (from-to)275-293
Number of pages19
JournalGlobal Economic Review
Volume45
Issue number3
DOIs
Publication statusPublished - 2016 Jul 2

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Political Science and International Relations

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