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To Work or Not to Work? Estimates of Labour Supply Elasticities

  • Zuzana Siebertova

    ()

    (Council for Budget Responsibility)

  • Matus Senaj

    ()

    (National Bank of Slovakia, Research Department)

  • Norbert Svarda

    ()

    (Council for Budget Responsibility)

  • Jana Valachyova

    ()

    (Council for Budget Responsibility)

This paper provides a microeconometric analysis of extensive margin labour supply elasticities in Slovakia. We find that a one percent increase in net wage increases the probability of economic activity by 0.263 percentage points. Taking into account tax and transfer system details valid in 2009-2011, a one percent increase in transfers decreases the semi-elasticity of labour force participation by 0.04 percentage points. These results are broadly in line with the elasticities usually reported in the literature. Our results show that low-skilled, females and the elderly are the groups that are particularly responsive to changes in taxes and transfers. Labour market policies aimed to boost employment should concentrate on increasing marginal gains to work, especially for low-educated individuals and women.

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Paper provided by Council for Budget Responsibility in its series Working Papers with number Working Paper No. 1/2014.

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Length: 32 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:cbe:wpaper:201401
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Web page: http://www.rozpoctovarada.sk/eng/rozpocet/151/working-papers
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  1. Bargain, Olivier & Orsini, Kristian & Peichl, Andreas, 2011. "Labor Supply Elasticities in Europe and the US," IZA Discussion Papers 5820, Institute for the Study of Labor (IZA).
  2. Kimmel, Jean & Kniesner, Thomas J., 1998. "New evidence on labor supply:: Employment versus hours elasticities by sex and marital status," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 289-301, July.
  3. Chase, R.S., 1995. "Women's Labor Force Participation During and After Communism: A Case Study of the Czech Republic and Slovakia," Papers 768, Yale - Economic Growth Center.
  4. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2013. "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 1 - 56.
  5. Bičáková, Alena & Slacalek, Jiri & Slavík, Michal, 2008. "Labor supply after transition: evidence from the Czech Republic," Working Paper Series 0887, European Central Bank.
  6. Benczúr, P. & Kátay, G. & Kiss, A. & Rácz , O., 2014. "Income Taxation, Transfers and Labour Supply at the Extensive Margin," Working papers 487, Banque de France.
  7. Olivier Bargain & Kristian Orsini & Andreas Peichl, 2012. "Comparing Labor Supply Elasticities in Europe and the US: New Results," Working Papers halshs-00805736, HAL.
  8. Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non-Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, 03.
  9. Olivier Bargain & Christina Orsini & Andreas Peichl, 2013. "Comparing Labor Supply Elasticities in Europe and the US: New Results," AMSE Working Papers 1321, Aix-Marseille School of Economics, Marseille, France.
  10. Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May.
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