Labor Supply in the Future: Who Will Work?

Per Krusell, Jonna Olsson and Timo Boppart

No 157, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Evidence on hours worked per capita from historical time series as well as from a large cross-section of countries at different income levels strongly suggests that the income effect of increased labor productivity exceeds the substitution effect. To the extent that productivity keeps growing in the future, we should then expect people to want to work less and less. Given that labor-force participation is associated with natural indivisibilities, our perspective must furthermore imply that a smaller and smaller fraction of the population will be working. So who will then withdraw from the labor force, and when? This paper examines these questions in a frictionless setting where consumers/workers at any point in time differ in wealth and in productivity. It also addresses the normative issue: who should (given some welfare weights) work in the future?

Date: 2017
New Economics Papers: this item is included in nep-dge and nep-his
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