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From individual to aggregate labor supply : a quantitative analysis based on a heterogeneous agent macroeconomy

  • Yongsung Chang
  • Sun-Bin Kim

We investigate the mapping from individual to aggregate labor supply using a general equilibrium heterogeneous-agent model with an incomplete market. The nature of heterogeneity among workers is calibrated using wage data from the PSID. The gross worker flows between employment and nonemployment and the cross-sectional earnings and wealth distributions in our model are comparable to those in the micro data. We find that the aggregate labor supply elasticity of such an economy is around 1, bigger than micro estimates but smaller than those often assumed in aggregate models.

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Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 03-05.

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Date of creation: 2003
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Handle: RePEc:fip:fedrwp:03-05
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