FROM INDIVIDUAL TO AGGREGATE LABOR SUPPLY: A QUANTITATIVE ANALYSIS BASED ON A HETEROGENEOUS AGENT MACROECONOMY *

Yongsung Chang and Sun-Bin Kim

International Economic Review, 2006, vol. 47, issue 1, 1-27

Abstract: At the aggregate level, the labor-supply elasticity depends on the reservation-wage distribution. We present a model economy where workforce heterogeneity stems from idiosyncratic productivity shocks. The model economy exhibits the cross-sectional earnings and wealth distributions that are comparable to those in the micro data. We find that the aggregate labor-supply elasticity of such an economy is around 1, greater than a typical micro estimate. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2006
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Working Paper: From individual to aggregate labor supply: a quantitative analysis based on a heterogeneous agent macroeconomy (2003)
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