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What Do Participation Fluctuations Tell Us About Labor Supply Elasticities?

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

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References

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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
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Cited by:
  1. Bertinelli, Luisito & Cardi, Olivier & Sen, Partha, 2013. "Deregulation shock in product market and unemployment," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(4), pages 711-734.
  2. Michael Reiter, 2013. "On The Welfare Costs Of Unemployment Fluctuations," 2013 Meeting Papers, Society for Economic Dynamics 962, Society for Economic Dynamics.
  3. 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.

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