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Aggregation and Labor Supply Elasticities

Author

Listed:
  • Merz, Monika
  • Kneip, Alois
  • Storjohann, Lidia

Abstract

This paper develops a statistical aggregation procedure for the Frisch elasticity of labor supply. It allows for worker heterogeneity and is applicable to an individual labor supply function with non-employment as a possible outcome. Subjecting all offered or paid wages to an unanticipated temporary change we analytically derive the aggregate elasticity and its main components. We quantify each component using individual-specific data from the German SOEP for males at working-age. We measure the hours' adjustment along the intensive and the extensive margin with the help of observed wages and reservation wages, respectively. The estimated aggegate Frisch elasticity varies over time.

Suggested Citation

  • Merz, Monika & Kneip, Alois & Storjohann, Lidia, 2013. "Aggregation and Labor Supply Elasticities," CEPR Discussion Papers 9718, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9718
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    References listed on IDEAS

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    More about this item

    Keywords

    Aggregation; Extensive and intensive margin of adjustment; Labor supply; Reservation wage distribution; Time-varying frisch elasticities;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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