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

Orley Ashenfelter, Kirk Doran and Bruce Schaller

No 15746, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Virtually all public policies regarding taxation and the redistribution of income rely on explicit or implicit assumptions about the long run effect of wages 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.

JEL-codes: H31 J22 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-lab and nep-ltv
Note: LS
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Citations: View citations in EconPapers (8)

Published as Orley Ashenfelter & Kirk Doran & Bruce Schaller, 2010. "A Shred of Credible Evidence on the Long-run Elasticity of Labour Supply," Economica, London School of Economics and Political Science, vol. 77(308), pages 637-650, October.

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