Comparing Labor Supply Elasticities in Europe and the US: New Results

Olivier Bargain, Kristian Orsini (kristian.orsini@ec.europa.eu) and Andreas Peichl

No 525, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)

Abstract: We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status. Measurement differences are netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively smalland much more uniform across countries than previously thought. Differences exist nonetheless and are found not to arise from different tax-benefit systems or demographic compositions across countries. Thus, we cannot reject that countries have genuinely different preferences. Three other results, important for welfare analysis, are consistent over all countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses' leisure in the US versus substitution in spouses' household production in Europe.

Keywords: household labor supply; elasticity; taxation; Europe; US (search for similar items in EconPapers)
JEL-codes: C25 C52 H31 J22 (search for similar items in EconPapers)
Pages: 48 p.
Date: 2012
New Economics Papers: this item is included in nep-eec, nep-eur, nep-geo, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Related works:
Working Paper: Comparing Labor Supply Elasticities in Europe and the US: New Results (2013)
Working Paper: Comparing Labor Supply Elasticities in Europe and the US: New Results (2012)
Working Paper: Comparing Labor Supply Elasticities in Europe and the US: New Results (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp525

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