What Do Participation Fluctuations Tell Us About Labor Supply Elasticities?

Christian Haefke () and Michael Reiter

No 6039, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we use information on the cyclical variation of labor market participation to learn about the aggregate labor supply elasticity. For this purpose, we extend the standard labor market matching model to allow for endogenous participation. A model that is calibrated to replicate the variability of unemployment and participation, and the negative correlation of unemployment and GDP, implies an aggregate labor supply elasticity along the extensive margin of around 0.3 for men and 0.5 for women. This is in line with recent micro-econometric estimates.

Keywords: matching models; labor market participation; labor supply elasticity (search for similar items in EconPapers)
JEL-codes: E24 E32 J21 J64 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-10
New Economics Papers: this item is included in nep-dge, nep-lab, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Related works:
Working Paper: What Do Participation Fluctuations Tell Us About Labor Supply Elasticities? (2012)
Working Paper: What Do Participation Fluctuations Tell Us About Labor Supply Elasticities? (2012)
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