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The Evolution of the Wage Elasticity of Labor Supply over Time

Author

Listed:
  • Elder, Todd E.

    (Michigan State University)

  • Haider, Steven J.

    (Michigan State University)

  • Orr, Cody

    (U.S. Census Bureau)

Abstract

The uncompensated wage elasticity of labor supply is a fundamental parameter in economics. Despite its central role, very few papers have studied directly how it has changed over time. We examine the evolution of the uncompensated labor supply elasticity using cross-sectional methods over the last four decades. We find robust evidence that the elasticities weakly increased between 2000 and 2020, which represents a striking reversal from the sizeable declines for single and married women between 1979 and 2000. We additionally find that these changes arose almost entirely on the extensive margin. We then conduct a series of counterfactual simulations to identify which factors are most responsible for these trends.

Suggested Citation

  • Elder, Todd E. & Haider, Steven J. & Orr, Cody, 2023. "The Evolution of the Wage Elasticity of Labor Supply over Time," IZA Discussion Papers 16393, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16393
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    More about this item

    Keywords

    labor supply; discrete choice models;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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