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Individual and Aggregate Labor Supply in a Heterogeneous Agent Economy with Intensive and Extensive Margins

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  • Yonsung Chang

    (University of Rochester, Yonsei University)

  • Sun-Bin Kim

    (Yonsei University)

  • Kyooho Kwon

    (University of Rochester)

Abstract

We develop a heterogeneous-agent general equilibrium model that incorporates both intensive and extensive margins of labor supply. A nonconvexity in the mapping between time devoted to work and labor services distinguishes between extensive and intensive margins. We consider calibrated versions of this model that di er in the value of a key preference parameter for labor supply and the extent of heterogeneity. The model is able to capture the key features of the empirical hours worked distribution, including how individuals transit within this distribution. We then study how the various speci cations in uence labor supply responses to temporary shocks and permanent tax changes, with a particular focus on the intensive and extensive margin elasticities in response to these changes. We nd important interactions between heterogeneity and the extent of curvature in preferences.

Suggested Citation

  • Yonsung Chang & Sun-Bin Kim & Kyooho Kwon, 2012. "Individual and Aggregate Labor Supply in a Heterogeneous Agent Economy with Intensive and Extensive Margins," Working papers 2012rwp-48, Yonsei University, Yonsei Economics Research Institute.
  • Handle: RePEc:yon:wpaper:2012rwp-48
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    References listed on IDEAS

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    2. Yongsung Chang & Sun-Bin Kim, 2006. "From Individual To Aggregate Labor Supply: A Quantitative Analysis Based On A Heterogeneous Agent Macroeconomy ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 1-27, February.
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    Cited by:

    1. Shuhei Takahashi & Tomoyuki Nakajima, 2016. "Consumption Taxes and Divisibility of Labor under Incomplete Markets," 2016 Meeting Papers 797, Society for Economic Dynamics.
    2. Temel Taskin, 2013. "Intensive margin and extensive margin adjustments of labor market: Turkey versus United States," Economics Bulletin, AccessEcon, vol. 33(3), pages 2307-2319.
    3. Tomoyuki Nakajima & Shuhei Takahashi, 2016. "The Effectiveness of Consumption Taxes and Transfers as Insurance against Idiosyncratic Risk," KIER Working Papers 933, Kyoto University, Institute of Economic Research.
    4. Daniel Borowczyk-Martins & Etienne Lalé, 2017. "Employment Adjustment and Part-time Work: Lessons from the United States and the United Kingdom," CIRANO Working Papers 2017s-27, CIRANO.
    5. Hong, Sungki, 2017. "Customer Capital, Markup Cyclicality, and Amplification," Working Papers 2017-33, Federal Reserve Bank of St. Louis.
    6. Hong, Sungki, 2017. "Markup Cyclicality: A Tale of Two Models," Working Papers 2017-34, Federal Reserve Bank of St. Louis.
    7. Mark Bils & Peter J. Klenow & Benjamin A. Malin, 2014. "Resurrecting the Role of the Product Market Wedge in Recessions," NBER Working Papers 20555, National Bureau of Economic Research, Inc.
    8. David Coble, 2015. "The Labor Wedge: New Facts Based on US Microdata," Working Papers Central Bank of Chile 751, Central Bank of Chile.
    9. repec:red:issued:18-4 is not listed on IDEAS

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    Keywords

    Hours; Employment; Cross-section; Business Cycles;

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