IDEAS home Printed from https://ideas.repec.org/p/red/sed009/10.html
   My bibliography  Save this paper

A Quantitative Theory of Labor Supply with Heterogeneous Agents: From Individual to Macro Elasticities

Author

Listed:
  • Luisa Fuster

    (IMDEA and University of Toronto)

  • Gueorgui Kambourov

    (University of Toronto)

  • Andres Erosa

    (IMDEA and University of Toronto)

Abstract

Then, we build a theory of labor supply with heterogeneous agents consistent with these empirical facts. The key features of the model are life-cycle, incomplete markets, nonlinear wage schedules, an intensive and extensive margin in labor supply, and a social security system. We calibrate the model economy without explicitly targeting the facts on hours worked. First, we find that this heterogeneous agent model, with the above mentioned features, exhibits patterns in the behavior of labor supply that are quantitatively similar to those observed in the data. Second, we use the developed framework to show that in the calibrated model economy there is a disconnect between the theoretical elasticity of labor supply and the one that is recovered from model data using standard econometric techniques. Further, in an experiment which eliminates the social security system, we find that the changes in the aggregate labor supply are unrelated to the individual labor supply elasticity.

Suggested Citation

  • Luisa Fuster & Gueorgui Kambourov & Andres Erosa, 2009. "A Quantitative Theory of Labor Supply with Heterogeneous Agents: From Individual to Macro Elasticities," 2009 Meeting Papers 10, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:10
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Bee Yan Aw & Mark J. Roberts & Daniel Yi Xu, 2011. "R&D Investment, Exporting, and Productivity Dynamics," American Economic Review, American Economic Association, vol. 101(4), pages 1312-1344, June.
    2. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    3. Roc Armenter & Miklós Koren, 2015. "Economies Of Scale And The Size Of Exporters," Journal of the European Economic Association, European Economic Association, vol. 13(3), pages 482-511, June.
    4. Pamela Bombarda & Elisa Gamberoni, 2013. "Firm Heterogeneity, Rules Of Origin, And Rules Of Cumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 307-328, February.
    5. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
    6. Lincoln, William F. & McCallum, Andrew H., 2011. "Entry Costs and Increasing Trade," Working Papers 619, Research Seminar in International Economics, University of Michigan.
    7. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, pages 358-392.
    8. di Giovanni, Julian & Levchenko, Andrei A., 2013. "Firm entry, trade, and welfare in Zipf's world," Journal of International Economics, Elsevier, pages 283-296.
    9. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    10. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2011. "An Anatomy of International Trade: Evidence From French Firms," Econometrica, Econometric Society, pages 1453-1498.
    11. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1051-1099.
    12. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588.
    13. Alla Lileeva & Daniel Trefler, 2007. "Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants," NBER Working Papers 13297, National Bureau of Economic Research, Inc.
    14. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
    15. Montfort Mlachila & Yongzheng Yang, 2004. "The End of Textiles Quotas; A Case Study of the Impacton Bangladesh," IMF Working Papers 04/108, International Monetary Fund.
    16. Alfonso Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2015. "The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 777-792, October.
    17. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    18. Andreas Moxnes, 2010. "Are sunk costs in exporting country specific?," Canadian Journal of Economics, Canadian Economics Association, vol. 43(2), pages 467-493, May.
    19. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2007. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," Econometrica, Econometric Society, vol. 75(3), pages 837-873, May.
    20. Gharad Bryan & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2014. "Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh," Econometrica, Econometric Society, vol. 82, pages 1671-1748, September.
    21. Mark J. Roberts & Daniel Yi Xu & Xiaoyan Fan & Shengxing Zhang, 2012. "The Role of Firm Factors in Demand, Cost, and Export Market Selection for Chinese Footwear Producers," NBER Working Papers 17725, National Bureau of Economic Research, Inc.
    22. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
    23. Lucia Foster & John Haltiwanger & Chad Syverson, 2016. "The Slow Growth of New Plants: Learning about Demand?," Economica, London School of Economics and Political Science, vol. 83(329), pages 91-129, January.
    24. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151-1199.
    25. Irene Brambilla & Amit K. Khandelwal & Peter K. Schott, 2010. "China's Experience under the Multi-Fiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC)," NBER Chapters,in: China's Growing Role in World Trade, pages 345-387 National Bureau of Economic Research, Inc.
    26. Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2012. "Do trade policy differences induce sorting? Theory and evidence from Bangladeshi apparel exporters," Journal of International Economics, Elsevier, vol. 87(2), pages 247-261.
    27. Hiau Looi Kee & Kala Krishna, 2008. "Firm-Level Heterogeneous Productivity and Demand Shocks: Evidence from Bangladesh," American Economic Review, American Economic Association, vol. 98(2), pages 457-462, May.
    28. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    29. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, pages 52-102.
    30. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Wiley Blackwell, vol. 26(6), pages 829-851, June.
    31. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2016. "Trade and the Global Recession," American Economic Review, American Economic Association, pages 3401-3438.
    32. World Bank, 2005. "Bangladesh : Growth and Export Competitiveness," World Bank Other Operational Studies 8569, The World Bank.
    33. Horowitz, Joel L., 2001. "The bootstrap and hypothesis tests in econometrics," Journal of Econometrics, Elsevier, vol. 100(1), pages 37-40, January.
    34. William F. Lincoln & Andrew H. McCallum, 2011. "Entry Costs & Increasing Trade," William Davidson Institute Working Papers Series wp1024, William Davidson Institute at the University of Michigan.
    35. Debaere, Peter & Mostashari, Shalah, 2010. "Do tariffs matter for the extensive margin of international trade? An empirical analysis," Journal of International Economics, Elsevier, vol. 81(2), pages 163-169, July.
    36. Blum, Bernardo S. & Claro, Sebastian & Horstmann, Ignatius J., 2013. "Occasional and perennial exporters," Journal of International Economics, Elsevier, vol. 90(1), pages 65-74.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed009:10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.