Labor Supply : Are the Income and Substitution Effects Both Large or Both Small? / Miles S. Kimball & Matthew D. Shapiro.

Format:

Book

Author/Creator:

Kimball, Miles S., author.

Shapiro, Matthew D., author.

Series:

Working Paper Series (National Bureau of Economic Research) ; no. w14208.

NBER working paper series ; no. w14208

Language:

English

Subjects (All):

Labor supply.

Physical Description:

1 online resource (49 pages) : illustrations (black and white).

Place of Publication:

Cambridge, Massachusetts : National Bureau of Economic Research, 2008.

Summary:

Labor supply is unresponsive to permanent changes in wage rates. Thus, income and substitution effects cancel, but are they both close to zero or both large? This paper develops a theory of labor supply where income and substitution effects cancel, taking into account optimization over time, fixed costs of going to work, and interactions of labor supply decisions within the household. The paper then applies this theory to survey evidence on the response of labor supply to a large wealth shock. The evidence implies that the constant marginal utility of wealth (Frisch) elasticity of labor supply is about one.

Notes:

Description based on publisher supplied metadata and other sources.