On the measurement of the elasticity of labour

Charles Gottlieb, Joern Onken and Arnau Valladares-Esteban

European Economic Review, 2021, vol. 139, issue C

Abstract: We use a simple theoretical framework, a building block of many macroeconomic models, to study the prominently debated relationship between the model parametrisation of the Frisch elasticity and the reduced-form evidence on the elasticity of labour. Focusing on tax holidays, we show that the elasticity measured with a reduced-form approach is only equal to the Frisch-elasticity parameter if there are no income or general equilibrium effects. Furthermore, for a wide range of standard values of the Frisch-elasticity parameter, the response of labour generated by a tax holiday in the model is aligned with the reduced-form evidence.

Keywords: Frisch elasticity; Labour supply; Aggregate hours; Tax holidays (search for similar items in EconPapers)
JEL-codes: E24 H21 J20 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:139:y:2021:i:c:s0014292121001975

DOI: 10.1016/j.euroecorev.2021.103879

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