Labor Supply Within the Firm

Michele Battisti (), Ryan Michaels and Choonsung Park

No 20-27, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: There is substantial variation in working time even within employer-employee matches, and yet estimates of the Frisch elasticity of labor supply can be near zero. This paper proposes a tractable theory of earnings and working time to interpret these observations. Production complementarities attenuate the response of working time to idiosyncratic, or worker-specific, shocks, but firm-wide shocks are mediated by preference parameters. The model can be identified using firm-worker matched data, revealing a Frisch elasticity of around 0.5. A quasi-experimental approach that mimics the design of earlier studies by exploiting only idiosyncratic variation would find an elasticity less than half this.

Keywords: Intensive margin; production complementarities; bargaining; employee-employer data (search for similar items in EconPapers)
JEL-codes: J22 J23 J31 (search for similar items in EconPapers)
Pages: 52
Date: 2020-07-17
New Economics Papers: this item is included in nep-lma
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Working Paper: Labor supply within the firm (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:88449

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DOI: 10.21799/frbp.wp.2020.27

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