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Individual and Aggregate Labor Supply in a Heterogeneous Agent Economy with Intensive and Extensive Margins

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Author Info

  • Yonsung Chang

    (University of Rochester, Yonsei University)

  • Sun-Bin Kim

    (Yonsei University)

  • Kyooho Kwon

    (University of Rochester)

Abstract

We develop a heterogeneous-agent general equilibrium model that incorporates both intensive and extensive margins of labor supply. A nonconvexity in the mapping between time devoted to work and labor services distinguishes between extensive and intensive margins. We consider calibrated versions of this model that di er in the value of a key preference parameter for labor supply and the extent of heterogeneity. The model is able to capture the key features of the empirical hours worked distribution, including how individuals transit within this distribution. We then study how the various speci cations in uence labor supply responses to temporary shocks and permanent tax changes, with a particular focus on the intensive and extensive margin elasticities in response to these changes. We nd important interactions between heterogeneity and the extent of curvature in preferences.

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File URL: ftp://repec.yonsei.ac.kr/repec/yon/wpaper/2012rwp-48.pdf
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Bibliographic Info

Paper provided by Yonsei University, Yonsei Economics Research Institute in its series Working papers with number 2012rwp-48.

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Length: 32 pages
Date of creation: 13 Sep 2012
Date of revision:
Handle: RePEc:yon:wpaper:2012rwp-48

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Related research

Keywords: Hours; Employment; Cross-section; Business Cycles;

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