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A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply

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  • Orley Ashenfelter

    (Princeton University)

  • Kirk Doran

    (University of Notre Dame)

  • Bruce Schaller

    (New York City Department of Transportation)

Abstract

The available estimates of the wage elasticity of male labor supply in the literature have varied between -0.2 and 0.2, implying that permanent wage increases have relatively small, poorly determined effects on labor supplied. The variation in existing estimates calls for a simple, natural experiment in which men can change their hours of work, and in which wages have been exogenously and permanently changed. We introduce a panel data set of taxi drivers who choose their own hours, and who experienced two exogenous permanent fare increases instituted by the New York City Taxi and Limousine Commission. Our preferred estimate suggests that their elasticity of labor supply is about -0.2.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1180.

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Date of creation: Sep 2009
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Handle: RePEc:pri:indrel:dsp019880vq993

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Keywords: labor supply; New York City; wage elasticity;

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References

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  1. Joseph G. Altonji & Christina H. Paxson, 1987. "Labor Supply Preferences, Hours Constraints, and Hours-Wage Tradeoffs," NBER Working Papers 2121, National Bureau of Economic Research, Inc.
  2. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  3. Blundell, Richard William & Ham, John & Meghir, Costas, 1987. "Unemployment and Female Labour Supply," CEPR Discussion Papers 149, C.E.P.R. Discussion Papers.
  4. Ham, John C, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 335-54, July.
  5. Pencavel, John, 1987. "Labor supply of men: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 1, pages 3-102 Elsevier.
  6. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-30, December.
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Cited by:
  1. Kirk B. Doran, 2013. "Are Long-term Wage Elasticities of Labor Supply More Negative than Short-term Ones?," Working Papers 020, University of Notre Dame, Department of Economics, revised Jan 2013.
  2. Ignacio Álvarez & Natalia da Silva & Álvaro Forteza & Ianina Rossi, 2012. "Incentivos y patrones de retiro en Uruguay," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(2), pages 219-271.

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