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Aggregating Elasticities: Intensive and Extensive Margins of Women’s Labour Supply

Attanasio, OP; Levell, P; Low, H; Sanchez-Marcos, V; (2018) Aggregating Elasticities: Intensive and Extensive Margins of Women’s Labour Supply. Econometrica , 86 (6) pp. 2049-2082. 10.3982/ECTA15067. Green open access

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Abstract

We show that there is substantial heterogeneity in women's labor supply elasticities at the micro level and highlight the implications for aggregate behavior. We consider both intertemporal and intratemporal choices, and identify intensive and extensive responses in a consistent life‐cycle framework, using US CEX data. Heterogeneity is due to observables, such as age, wealth, hours worked, and the wage level, as well as to unobservable tastes for leisure: the median Marshallian elasticity for hours worked is 0.18, with corresponding Hicksian elasticity of 0.54 and Frisch elasticity of 0.87. At the 90th percentile, these values are 0.79, 1.16, and 1.92. Responses at the extensive margin explain about 54% of the total labor supply response for women under 30, although this declines with age. Aggregate elasticities are higher in recessions, and increase with the length of the recession. The heterogeneity at the micro level means that the aggregate labor supply elasticity is not a structural parameter: any aggregate elasticity will depend on the demographic structure of the economy as well as the distribution of wealth and the particular point in the business cycle.

Type: Article
Title: Aggregating Elasticities: Intensive and Extensive Margins of Women’s Labour Supply
Open access status: An open access version is available from UCL Discovery
DOI: 10.3982/ECTA15067
Publisher version: https://www.econometricsociety.org/publications/ec...
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: labour supply elasticities, heterogeneity, aggregation, non-separability
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/10062249
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