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Labor Supply after Transition: Evidence from the Czech Republic

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  • Alena Bicakova
  • Jiri Slacalek
  • Michal Slavik

Abstract

We extend the scarce evidence on labor supply in post-transition countries by estimating the wage elasticity of labor force participation in the Czech Republic. Using the household income survey data of 2002, we find that a one-percent rise in the gross wage increases the probability of working by 0.16 and 0.02 percentage points for women and men, respectively. Taking into account the tax and benefit system, these semi-elasticities fall to 0.06 for women and 0.01 for men. We interpret the dierence between the estimates from the two specifications as a summary measure of the welfare system disincentives. The estimated wage elasticities lie at the lower end of the range of values reported for mature market economies. This finding is consistent with the stylized fact that the labor supply in countries with high labor force participation rates, such as in the Czech Republic, tends to be less sensitive to wages.

Suggested Citation

  • Alena Bicakova & Jiri Slacalek & Michal Slavik, 2008. "Labor Supply after Transition: Evidence from the Czech Republic," CERGE-EI Working Papers wp351, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp351
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    Cited by:

    1. Zuzana Siebertova & Matus Senaj & Norbert Svarda & Jana Valachyova, 2013. "To Work or Not to Work? Estimates of Labour Supply Elasticities," Working and Discussion Papers WP 5/2013, Research Department, National Bank of Slovakia.
    2. Hare, Denise, 2016. "What accounts for the decline in labor force participation among married women in urban China, 1991–2011?," China Economic Review, Elsevier, vol. 38(C), pages 251-266.
    3. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2016. "Labour force participation elasticities and the move away from a flat tax: the case of Slovakia," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-26, December.
    4. Jan Babecky & Oxana Babetskaia-Kukharchuk & Kamil Galuscak & Dana Hajkova & Jaroslav Hermanek & Tomas Holub & Roman Horvath & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Filip Novot, 2008. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2008," Occasional Publications - Edited Volumes, Czech National Bank, number as08 edited by Dana Hajkova, March.
    5. World Bank, 2013. "EU11 Regular Economic Report, Issue #26, January 2013," World Bank Other Operational Studies 16489, The World Bank.
    6. Ledic, Marko, 2012. "Estimating Labor Supply at the Extensive Margin in the presence of Sample Selection Bias," MPRA Paper 55745, University Library of Munich, Germany.
    7. Crespo Cuaresma, Jesus & Loichinger, Elke & Vincelette, Gallina A., 2016. "Aging and income convergence in Europe: A survey of the literature and insights from a demographic projection exercise," Economic Systems, Elsevier, vol. 40(1), pages 4-17.
    8. Norbert Švarda & Jana Valachyová & Matúš Senaj & Zuzana Siebertová, 2015. "To Work or Not to Work? Updated Estimates of Labour Supply Elasticities," Discussion Papers 32, Central European Labour Studies Institute (CELSI).
    9. Oybek Yuldashev & Obid Khakimov, 2011. "Income Taxation And Labor Force Participation In Transition Economies: Evidence From Bulgaria, Russian Federation And Serbia," Anadolu University Journal of Social Sciences, Anadolu University, vol. 11(3), pages 177-198, September.
    10. Larin, Alexander & Maksimov, Andrey & Chernova, Daria, 2016. "The elasticity of labor supply in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 41, pages 47-61.
    11. Kalíšková, Klára, 2014. "Labor supply consequences of family taxation: Evidence from the Czech Republic," Labour Economics, Elsevier, vol. 30(C), pages 234-244.
    12. Alzbeta Mullerova, 2016. "Mind the employment gap: an impact evaluation of the Czech multi-speed parental benefit reform," EconomiX Working Papers 2016-30, University of Paris Nanterre, EconomiX.

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    More about this item

    Keywords

    Labor supply; transition; welfare system;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General

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