Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records
Raj Chetty (),
John Friedman (),
Tore Olsen and
Luigi Pistaferri ()
The Quarterly Journal of Economics, 2011, vol. 126, issue 2, 749-804
We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms. We develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs. We present evidence supporting three predictions of this model by analyzing bunching at kinks using Danish tax records. First, larger kinks generate larger taxable income elasticities. Second, kinks that apply to a larger group of workers generate larger elasticities. Third, the distribution of job offers is tailored to match workers' aggregate tax preferences in equilibrium. Our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods. Copyright 2011, Oxford University Press.
References: Add references at CitEc
Citations View citations in EconPapers (174) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:126:y:2011:i:2:p:749-804
Access Statistics for this article
The Quarterly Journal of Economics is currently edited by Robert J. Barro, Elhanan Helpman, Lawrence F. Katz and Andrei Schleifer
More articles in The Quarterly Journal of Economics from Oxford University Press
Series data maintained by Oxford University Press ().