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Labour supply elasticities in New Zealand

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  • John Creedy
  • Penny Mok

Abstract

The aim of this paper is to explore alternative labour supply elasticity concepts in cross-sectional contexts and to present empirical results for New Zealand. Emphasis is placed on the elasticity of hours worked with respect to a change in the gross wage rate, though it is shown that the gross wage elasticity is usually sufficient when considering labour supply responses to effective marginal tax rate changes. The elasticities presented here, for both intensive and extensive margins and for a range of demographic groups, are based on simulated labour supply responses to a proportional change in gross wage rates using the New Zealand Treasury's behavioural microsimulation model, Taxwell-B. This uses a discrete-hours random-utility specification of preferences. Comparisons are made with the only previous estimates for NZ. As for other countries, elasticities at the extensive margin are found to be larger than at the intensive margin.

Suggested Citation

  • John Creedy & Penny Mok, 2019. "Labour supply elasticities in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 53(2), pages 125-143, May.
    • Handle: RePEc:taf:nzecpp:v:53:y:2019:i:2:p:125-143
    DOI: 10.1080/00779954.2017.1423509
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    References listed on IDEAS

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    1. John Creedy, 1992. "Demand And Exchange In Economic Analysis," Books, Edward Elgar Publishing, number 110.
    2. Olivier Bargain & Kristian Orsini & Andreas Peichl, 2014. "Comparing Labor Supply Elasticities in Europe and the United States: New Results," Journal of Human Resources, University of Wisconsin Press, vol. 49(3), pages 723-838.
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    4. Joseph Mercante & Penny Mok, 2014. "Estimation of Labour Supply in New Zealand," Treasury Working Paper Series 14/08, New Zealand Treasury.
    5. Olivier Bargain & Kristian Orsini & Andreas Peichl, 2012. "Comparing Labor Supply Elasticities in Europe and the US: New Results," SOEPpapers on Multidisciplinary Panel Data Research 525, DIW Berlin, The German Socio-Economic Panel (SOEP).
    6. Guyonne Kalb & Rosanna Scutella, 2003. "New Zealand Labour Supply from 1991-2001: An Analysis Based on a Discrete Choice Structural Utility Model," Treasury Working Paper Series 03/23, New Zealand Treasury.
    7. John Creedy, 2004. "Labour Supply Incentives in Alternative Tax and Transfer Schemes: A Diagrammatic Introduction," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(2), pages 230-241, June.
    8. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
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    Cited by:

    1. Nazila Alinaghi & John Creedy & Norman Gemmell, 2020. "The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(4), pages 517-538, December.
    2. Suzuki, Tomoya, 2021. "Basic income, wealth inequality and welfare: A proposed case in New Zealand," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 118-128.

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