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A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply

Orley Ashenfelter (), Kirk Doran () and Bruce Schaller ()
Additional contact information
Bruce Schaller: New York City Department of Transportation

No 4810, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Virtually all public policies regarding taxation and the redistribution of income rely on explicit or implicit assumptions about the long run effect of wage rates on labor supply. The available estimates of the wage elasticity of male labor supply in the literature have varied between -0.2 and 0.2, implying that permanent wage increases have relatively small, poorly determined effects on labor supplied. The variation in existing estimates calls for a simple, natural experiment in which men can change their hours of work, and in which wages have been exogenously and permanently changed. We introduce a panel data set of taxi drivers who choose their own hours, and who experienced two exogenous permanent fare increases instituted by the New York City Taxi and Limousine Commission, and we use these data to fit a simple structural labor supply function. Our estimates suggest that the elasticity of labor supply is about -0.2, implying that income effects dominate substitution effects in the long run labor supply of males.

Keywords: labor; supply (search for similar items in EconPapers)
JEL-codes: J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-ltv
Date: 2010-03
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Published in: Economica, 2010, 77 (308), 637-650

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Related works:
Journal Article: A Shred of Credible Evidence on the Long‐run Elasticity of Labour Supply (2010) Downloads
Working Paper: A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply (2010) Downloads
Working Paper: A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply (2010) Downloads
Working Paper: A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply (2009) Downloads
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