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Aggregating Elasticities: Intensive and Extensive Margins of Women's Labour Supply

Accepted version
Peer-reviewed

Type

Article

Change log

Authors

Low, HW 
Attanasio, Orazio 
Levell, Peter 
Sanchez-Marcos, Virginia 

Abstract

We show that there is substantial heterogeneity in women's labour supply elasticities at the micro level and highlight the implications for aggregate behaviour. We consider both intertemporal and intratemporal choices, and identify intensive and extensive responses in a consistent life-cycle framework, using US CEX data. Heterogeneity is due to observables, such as age, wealth, hours worked and the wage level as well as to unobservable tastes for leisure: the median Marshallian elasticity for hours worked is 0.18, with corresponding Hicksian elasticity of 0.54 and Frisch elasticity of 0.87. At the 90th percentile, these values are 0.79, 1.16, and 1.92. Responses at the extensive margin explain about 54% of the total labour supply response for women under 30, although this declines with age. Aggregate elasticities are higher in recessions, and increase with the length of the recession. The heterogeneity at the micro level means that the aggregate labour supply elasticity is not a structural parameter: any aggregate elasticity will depend on the demographic structure of the economy as well as the distribution of wealth and the particular point in the business cycle.

Description

Keywords

38 Economics, 3801 Applied Economics, Aging, 8 Decent Work and Economic Growth

Journal Title

Econometrica

Conference Name

Journal ISSN

1468-0262
1468-0262

Volume Title

86

Publisher

Wiley-Blackwell
Sponsorship
Economic and Social Research Council (ES/G008434/1)
MCYT. Grant Number: ECO2009‐09614