A Shred of Credible Evidence on the Long-run Elasticity of Labour Supply
All public policies regarding taxation and the redistribution of income rely on assumptions about the long-run effect of wages rates on labour supply. 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 use a panel dataset of taxi drivers who choose their own hours, and who experienced two exogenous permanent fare increases, and estimate an elasticity of labour supply of - 0.2, implying that income effects dominate substitution effects in the long-run labour supply of males. Copyright (c) The London School of Economics and Political Science 2010.
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Volume (Year): 77 (2010)
Issue (Month): 308 (October)
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