Labor Supply after Transition: Evidence from the Czech Republic

41 Pages Posted: 17 Apr 2008

See all articles by Alena Bicakova

Alena Bicakova

CERGE-EI, Prague

Jiri Slacalek

European Central Bank (ECB)

Michal Slavik

European Central Bank (ECB) - Directorate General Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2008

Abstract

We extend the scarce evidence on labor supply in post-transition countries by estimating the wage elasticity of labor force participation in the Czech Republic. Using the household income survey data of 2002, we find that a one-percent rise in the gross wage increases the probability of working by 0.16 and 0.02 percentage points for women and men, respectively. Taking into account the tax and benefit system, these semi-elasticities fall to 0.06 for women and 0.01 for men. We interpret the difference between the estimates from the two specifications as a summary measure of the welfare system disincentives. The estimated wage elasticities lie at the lower end of the range of values reported for mature market economies. This finding is consistent with the stylized fact that the labor supply in countries with high labor force participation rates, such as in the Czech Republic, tends to be less sensitive to wages.

Keywords: Labor supply, transition, welfare system

JEL Classification: J22, J31, P30

Suggested Citation

Bicakova, Alena and Slacalek, Jiri and Slavik, Michal, Labor Supply after Transition: Evidence from the Czech Republic (March 2008). ECB Working Paper No. 887, Available at SSRN: https://ssrn.com/abstract=1105388

Alena Bicakova (Contact Author)

CERGE-EI, Prague ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Jiri Slacalek

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Michal Slavik

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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