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What Do Participation Fluctuations Tell Us About Labor Supply Elasticities?

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Author Info

  • Haefke, Christian

    ()
    (New York University, Abu Dhabi)

  • Reiter, Michael

    ()
    (IHS - Institute for Advanced Studies, Vienna)

Abstract

In this paper we use information on the cyclical variation of labor market participation to learn about the aggregate labor supply elasticity. For this purpose, we extend the standard labor market matching model to allow for endogenous participation. A model that is calibrated to replicate the variability of unemployment and participation, and the negative correlation of unemployment and GDP, implies an aggregate labor supply elasticity along the extensive margin of around 0.3 for men and 0.5 for women. This is in line with recent micro-econometric estimates.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6039.

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Length: 34 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6039

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Related research

Keywords: matching models; labor market participation; labor supply elasticity;

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References

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  1. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
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  3. Soest, A.H.O. van & Das, J.W.M. & Gong, X., 2001. "A Structural Labour Supply Model with Flexible Preferences," Open Access publications from Tilburg University urn:nbn:nl:ui:12-119390, Tilburg University.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. What Do Participation Fluctuations Tell Us About Labor Supply Elasticities?
    by Christian Zimmermann in NEP-DGE blog on 2011-11-14 02:24:43
  2. What Do Participation Fluctuations Tell Us About Labor Supply Elasticities?
    by Christian Zimmermann in NEP-DGE blog on 2011-11-14 02:24:43
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Luisito Bertinelli & Olivier Cardi & Partha Sen, 2012. "Deregulation shock in product market and unemployment," CREA Discussion Paper Series 12-04, Center for Research in Economic Analysis, University of Luxembourg.
  2. Christian Merkl & Sanjay K. Chugh, 2011. "Efficiency and Labor Market Dynamics in a Model of Labor Selection," 2011 Meeting Papers 824, Society for Economic Dynamics.
  3. Michael Reiter, 2013. "On The Welfare Costs Of Unemployment Fluctuations," 2013 Meeting Papers 962, Society for Economic Dynamics.

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