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Labor Supply within the Firm

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  • Michele Battisti
  • Ryan Michaels
  • Choonsung Park

Abstract

There is substantial variation in working time even within employer-employee matches, yet estimates of the Frisch elasticity of labor supply can be near zero. This paper proposes a tractable theory of earnings and working time to interpret these observations. Production complementarities attenuate the response of working time to idiosyncratic, or worker-specific, shocks, but firm-wide shocks are mediated by preference parameters. The model can be identified using firm-worker matched data, revealing a Frisch elasticity of around 0.5. A quasi-experimental approach that exploits only idiosyncratic variation would find an elasticity less than half this.

Suggested Citation

  • Michele Battisti & Ryan Michaels & Choonsung Park, 2024. "Labor Supply within the Firm," Journal of Labor Economics, University of Chicago Press, vol. 42(2), pages 511-548.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/723519
    DOI: 10.1086/723519
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    Cited by:

    1. Yurdagul, Emircan & Adamopoulou, Effrosyni & Manaresi, Francesco & Rachedi, Omar, 2021. "Minimum Wages and Insurance within the Firm," CEPR Discussion Papers 16823, C.E.P.R. Discussion Papers.
    2. Sztachera, Maciej, 2024. "Hours, wages, and multipliers," MPRA Paper 121556, University Library of Munich, Germany.
    3. Biddle, Jeff E. & Hamermesh, Daniel S., 2024. "Adjusting Labor along the Intensive MarginS," IZA Discussion Papers 17162, Institute of Labor Economics (IZA).

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