Using Labor Supply Elasticities to Learn about Income Inequality: The Role of Productivities versus Preferences

Katy Bergstrom and William Dodds

No 9102, Policy Research Working Paper Series from The World Bank

Abstract: This paper argues that labor supply elasticities encode information about the determinants of income inequality. In the theoretical framework, individuals choose labor supply conditional on productivities and preferences for consumption relative to leisure. The paper shows that reduced-form labor supply elasticities allow one to isolate the components of income due to productivities versus preferences. The paper then investigates what labor supply elasticities imply about the importance of productivities versus preferences in the United States. Estimates from the literature imply productivities drive most of income inequality. Larger income effects and larger differences between income and hours worked elasticities imply preferences play an increasingly important role.

Date: 2020-01-06
New Economics Papers: this item is included in nep-pbe
References: Add references at CitEc
Citations:

Downloads: (external link)
http://documents.worldbank.org/curated/en/76431157 ... rsus-Preferences.pdf (application/pdf)

Related works:
Journal Article: Using Labor Supply Elasticities to Learn about Income Inequality: The Role of Productivities versus Preferences (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9102

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().