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Interpreting Labor Supply Regressions in a Model of Full- and Part-Time Work

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  • Yongsung Chang
  • Sun-Bin Kim
  • Kyooho Kwon
  • Richard Rogerson

Abstract

We construct a family model of labor supply that features adjustment along both the intensive and extensive margin. Intensive margin adjsutment is restricted to two values: full-time work and part-time work. Using simulated data from the steady state of the calibrated model, we examine whether standard labor supply regressions can uncover the true value of the intertemporal elasticity of labor supply parameter. We find positive estimated elasticities that are larger for women and that are highly significant, but they bear virtually no relationship to the underlying preference parameters.

Suggested Citation

  • Yongsung Chang & Sun-Bin Kim & Kyooho Kwon & Richard Rogerson, 2011. "Interpreting Labor Supply Regressions in a Model of Full- and Part-Time Work," American Economic Review, American Economic Association, vol. 101(3), pages 476-481, May.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:476-81
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    Cited by:

    1. Day Manoli & Andrea Weber, 2016. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 160-182, November.
    2. John K. Dagsvik & Zhiyang Jia & Tom Kornstad & Thor O. Thoresen, 2014. "Theoretical And Practical Arguments For Modeling Labor Supply As A Choice Among Latent Jobs," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 134-151, February.
    3. Valletta, Robert G. & Bengali, Leila & van der List, Catherine, 2015. "Cyclical and market determinants of involuntary part-time employment," Working Paper Series 2015-19, Federal Reserve Bank of San Francisco.
    4. Maria Casanova, 2012. "Wage and Earnings Profiles at Older Ages," Working Papers 2012-001, Human Capital and Economic Opportunity Working Group.
    5. Michael Keane & Richard Rogerson, 2015. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 89-117, August.
    6. Michael Keane & Richard Rogerson, 2015. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 89-117, 08.

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