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

Olivier Bargain (), Kristian Orsini () and Andreas Peichl ()

No 6735, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 small and 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: taxation; elasticity; household labor supply; Europe; US (search for similar items in EconPapers)
JEL-codes: C25 C52 H31 J22 (search for similar items in EconPapers)
Pages: 85 pages
Date: 2012-07
New Economics Papers: this item is included in nep-eur, nep-lab, nep-lma and nep-ltv
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Related works:
Journal Article: Comparing Labor Supply Elasticities in Europe and the United States: New Results (2014) Downloads
Working Paper: Comparing Labor Supply Elasticities in Europe and the US: New Results (2013) Downloads
Working Paper: Comparing Labor Supply Elasticities in Europe and the US: New Results (2012) Downloads
Working Paper: Comparing Labor Supply Elasticities in Europe and the US: New Results (2012) Downloads
Working Paper: Labor supply elasticities in Europe and the US (2011) Downloads
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