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Intertemporal Substitution in Labor Force Participation: Evidence from Policy Discontinuities

Author

Listed:
  • Manoli, Dayanand

    () (University of Texas at Austin)

  • Weber, Andrea

    () (Central European University)

Abstract

This paper presents new empirical evidence on intertemporal labor supply elasticities. We use administrative data on the census of private sector employees in Austria and variation from mandated discontinuous changes in retirement benefits from the Austrian pension system. We first present graphical evidence documenting delays in retirement in response to the policy discontinuities. Next, based on the empirical evidence, we develop a model of career length decisions. Using an estimator that exploits the graphical evidence, we estimate an intertemporal labor supply elasticity of 0.30; this relatively low estimate reflects that the disutility of labor supply rises relatively quickly with additional years of work.

Suggested Citation

  • Manoli, Dayanand & Weber, Andrea, 2010. "Intertemporal Substitution in Labor Force Participation: Evidence from Policy Discontinuities," IZA Discussion Papers 5248, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5248
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    Cited by:

    1. Staubli, Stefan & Zweimüller, Josef, 2013. "Does raising the early retirement age increase employment of older workers?," Journal of Public Economics, Elsevier, vol. 108(C), pages 17-32.
    2. Staubli, Stefan & Zweimüller, Josef, 2011. "Does Raising the Retirement Age Increase Employment of Older Workers?," CEPR Discussion Papers 8510, C.E.P.R. Discussion Papers.
    3. Felix Reichling & Charles Whalen, 2012. "Review of Estimates of the Frisch Elasticity of Labor Supply: Working Paper 2012-13," Working Papers 43676, Congressional Budget Office.
    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. Gimenez-Nadal, Jose Ignacio & Molina, Jose Alberto, 2017. "The Substitution Effect and the Profit Function in Consumption: expressions from the Marshallian, Hicksian, and Frischian demand functions," MPRA Paper 82249, University Library of Munich, Germany.
    6. Charles Whalen & Felix Reichling, 2017. "Estimates of the Frisch Elasticity of Labor Supply: A Review," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 37-42, January.

    More about this item

    Keywords

    life-cycle labor supply; retirement decisions; intertemporal labor supply elasticity; policy discontinuities;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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