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Labor Supply in the Future: Who Will Work?

Author

Listed:
  • Per Krusell

    (Stockholm University)

  • Jonna Olsson

    (IIES, Stockholm University)

  • Timo Boppart

    (IIES, Stockholm University)

Abstract

Evidence on hours worked per capita from historical time series as well as from a large cross-section of countries at different income levels strongly suggests that the income effect of increased labor productivity exceeds the substitution effect. To the extent that productivity keeps growing in the future, we should then expect people to want to work less and less. Given that labor-force participation is associated with natural indivisibilities, our perspective must furthermore imply that a smaller and smaller fraction of the population will be working. So who will then withdraw from the labor force, and when? This paper examines these questions in a frictionless setting where consumers/workers at any point in time differ in wealth and in productivity. It also addresses the normative issue: who should (given some welfare weights) work in the future?

Suggested Citation

  • Per Krusell & Jonna Olsson & Timo Boppart, 2017. "Labor Supply in the Future: Who Will Work?," 2017 Meeting Papers 157, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:157
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    File URL: https://economicdynamics.org/meetpapers/2017/paper_157.pdf
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    References listed on IDEAS

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    1. Julio Dávila & Jay H. Hong & Per Krusell & José‐Víctor Ríos‐Rull, 2012. "Constrained Efficiency in the Neoclassical Growth Model With Uninsurable Idiosyncratic Shocks," Econometrica, Econometric Society, vol. 80(6), pages 2431-2467, November.
    2. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
    3. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-1085, December.
    4. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2014. "Consumption and Labor Supply with Partial Insurance: An Analytical Framework," American Economic Review, American Economic Association, vol. 104(7), pages 2075-2126, July.
    5. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    6. Timo Boppart & Per Krusell, 2016. "Labor Supply in the Past, Present, and Future: a Balanced-Growth Perspective," NBER Working Papers 22215, National Bureau of Economic Research, Inc.
    7. Rios-Rull, Jose-Victor & Kuhn, Moritz, 2016. "2013 Update on the U.S. Earnings, Income, and Wealth Distributional Facts: A View from Macroeconomics," Quarterly Review, Federal Reserve Bank of Minneapolis, issue April, pages 1-75.
    8. Krusell, Per & Mukoyama, Toshihiko & Rogerson, Richard & Sahin, Aysegül, 2008. "Aggregate implications of indivisible labor, incomplete markets, and labor market frictions," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 961-979, July.
    9. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
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    Cited by:

    1. Andreas Irmen, 2017. "Technological Progress, the Supply of Hours worked, and the Consumption–Leisure Complementarity Technological Progress, the Supply of Hours worked, and the Consumption–Leisure Complementarity ," CREA Discussion Paper Series 17-23, Center for Research in Economic Analysis, University of Luxembourg.

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