EconPapers    
Economics at your fingertips  
 

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

Abstract: 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.

Date: 2011
References: Add references at CitEc
Citations View citations in EconPapers (174) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qjr013 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

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 ().

 
Page updated 2017-11-16
Handle: RePEc:oup:qjecon:v:126:y:2011:i:2:p:749-804