Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records.

Estimating labour supply elasticities based on cross-country micro data: A bridge between micro and macro estimates?

We utilise repeated cross sections of micro data from several countries, available from the Luxembourg Income Study, LIS, to estimate labour supply elasticities, both at the intensive and extensive margin. The benefit of the data is that it spans over four decades and includes a large number of tax reform episodes, with tax rate variation arising both from cross-sectional and country-level diff...

Bounds on Elasticities with Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply∗

I derive bounds on price elasticities in a dynamic model that is mis-specified due to optimization frictions such as adjustment costs or inattention. The bounds are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. I measure the degree of frictions by the utility losses agents tolerate to make choices that deviate from the ...

Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply

We estimate labour supply elasticities at the micro level and show what we can learn from possibly very heterogeneous elasticities 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. There is substantial heterogeneity in how individuals respond to wage changes a...

Micro and macro elasticities in a life cycle model with taxes

We build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work. We find that changes in taxes have large aggregate effects on hours of work. Moreover, we find that there is no inconsistency between this result and the empirical finding o...

Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective∗