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Intertemporal Substitution in Labor Force Participation: Evidence from Policy Discontinuities

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  • Manoli, Dayanand

    ()
    (University of California, Los Angeles)

  • Weber, Andrea

    ()
    (University of Mannheim)

Abstract

This paper presents new empirical evidence on intertemporal labor supply elasticities. We use administrative data on the census of private sector employees in Austria and variation from mandated discontinuous changes in retirement benefits from the Austrian pension system. We first present graphical evidence documenting delays in retirement in response to the policy discontinuities. Next, based on the empirical evidence, we develop a model of career length decisions. Using an estimator that exploits the graphical evidence, we estimate an intertemporal labor supply elasticity of 0.30; this relatively low estimate reflects that the disutility of labor supply rises relatively quickly with additional years of work.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5248.

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Length: 52 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5248

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Keywords: life-cycle labor supply; retirement decisions; intertemporal labor supply elasticity; policy discontinuities;

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Cited by:
  1. Stefan Staubli & Josef Zweimüller, 2011. "Does Raising the Retirement Age Increase Employment of Older Workers?," NRN working papers 2011-13, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  2. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2012. "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Chapters, in: NBER Macroeconomics Annual 2012, Volume 27, pages 1-56 National Bureau of Economic Research, Inc.
  3. Felix Reichling & Charles Whalen, 2012. "Review of Estimates of the Frisch Elasticity of Labor Supply: Working Paper 2012-13," Working Papers, Congressional Budget Office 43676, Congressional Budget Office.
  4. Staubli, Stefan & Zweimüller, Josef, 2013. "Does raising the early retirement age increase employment of older workers?," Journal of Public Economics, Elsevier, Elsevier, vol. 108(C), pages 17-32.

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