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Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply

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  • Orazio Attanasio
  • Peter Levell
  • Hamish Low
  • Virginia Sánchez-Marcos

Abstract

There is a renewed interest in the size of labour supply elasticities and the discrepancy between micro and macro estimates. Recent contributions have stressed the distinction between changes in labour supply at the extensive and the intensive margin. In this paper, we stress the importance of individual heterogeneity and aggregation problems. At the intensive margins, simple specications that seem to fit the data give rise to non linear expressions that do not aggregate in a simple fashion. At the extensive margin, aggregate changes in participation are likely to depend on the cross sectional distribution of state variables when a shock hits and, therefore, are likely to be history dependent. We tackle these aggregation issues directly by specifying a life cycle model to explain female labour supply in the US and estimate its various components. We estimate the parameters of different component of the model. Our results indicate that (i) at the intensive margin, Marshallian and Hicksian elasticities are very heterogeneous and, on average, relatively large; (ii) Frisch elasticities are, as implied by the theory, even larger; (iii) aggregate labour supply elasticities seem to vary over the business cycle, being larger during recessions.

Suggested Citation

  • Orazio Attanasio & Peter Levell & Hamish Low & Virginia Sánchez-Marcos, 2015. "Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply," Cambridge Working Papers in Economics 1519, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1519
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    References listed on IDEAS

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    Cited by:

    1. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    2. Richard Rogerson & Johanna Wallenius, 2018. "Household Time Use Among Older Couples: Evidence and Implications for Labor Supply," 2018 Meeting Papers 90, Society for Economic Dynamics.
    3. Laura Blow & Valérie Lechene & Peter Levell, 2014. "Using the CE to Model Household Demand," NBER Chapters,in: Improving the Measurement of Consumer Expenditures, pages 141-178 National Bureau of Economic Research, Inc.
    4. Smyk, Magdalena & Tyrowicz, Joanna & van der Velde, Lucas, 2018. "A Cautionary Note on the Reliability of the Online Survey Data: The Case of Wage Indicator," IZA Discussion Papers 11503, Institute for the Study of Labor (IZA).
    5. repec:bla:econom:v:84:y:2017:i:334:p:157-179 is not listed on IDEAS
    6. Chris Belfield & Richard Blundell & Jonathan Cribb & Andrew Hood & Robert Joyce, 2017. "Two Decades of Income Inequality in Britain: The Role of Wages, Household Earnings and Redistribution," Economica, London School of Economics and Political Science, vol. 84(334), pages 157-179, April.
    7. Scott French & Tess Stafford, 2017. "Returns to Experience and the Elasticity of Labor Supply," Discussion Papers 2017-15, School of Economics, The University of New South Wales.
    8. repec:aea:jecper:v:31:y:2017:i:2:p:33-58 is not listed on IDEAS
    9. Orazio Attanasio, 2012. "Comment on "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities"," NBER Chapters,in: NBER Macroeconomics Annual 2012, Volume 27, pages 57-77 National Bureau of Economic Research, Inc.
    10. Orazio Attanasio, 2013. "Comment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 57-77.
    11. Krzysztof Makarski & Joanna Tyrowicz & Magda Malec, 2018. "Evaluating welfare and economic effects of raised fertility," GRAPE Working Papers 25, GRAPE Group for Research in Applied Economics.
    12. Samuel Bazzi, 2017. "Wealth Heterogeneity and the Income Elasticity of Migration," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 219-255, April.

    More about this item

    Keywords

    labour supply elasticities; heterogeneity; aggregation; non-separability;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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