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- Title
Towards a Micro-Founded Theory of Aggregate Labour Supply.
- Authors
EROSA, ANDRÉS; FUSTER, LUISA; KAMBOUROV, GUEORGUI
- Abstract
We build a heterogeneous agents life cycle model that captures a large number of salient features of individual male labour supply over the life cycle, by education, both along the intensive and extensive margins. The model provides an aggregation theory of individual labour supply, firmly grounded on individual-level micro-evidence, and is used to study the aggregate labour supply responses to changes in the economic environment. We find that the aggregate labour supply elasticity to a transitory wage shock is 1.75, with the extensive margin accounting for 62% of the response. Furthermore, we find that the aggregate labour supply elasticity to a permanent-compensated wage change is 0.44.
- Subjects
LABOR market research; LIFE cycle costing; EDUCATION; OVERHEAD costs; PREFERENCE heterogeneity
- Publication
Review of Economic Studies, 2016, Vol 83, Issue 3, p1001
- ISSN
0034-6527
- Publication type
Article
- DOI
10.1093/restud/rdw010