A Shred of Credible Evidence on the Long-Run Elasticity of Labour Supply

14 Pages Posted: 27 Sep 2010

See all articles by Orley Ashenfelter

Orley Ashenfelter

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kirk Doran

University of Notre Dame

Bruce Schaller

affiliation not provided to SSRN

Abstract

All public policies regarding taxation and the redistribution of income rely on assumptions about the long-run effect of wages rates on labour supply. The variation in existing estimates calls for a simple, natural experiment in which men can change their hours of work, and in which wages have been exogenously and permanently changed. We use a panel dataset of taxi drivers who choose their own hours, and who experienced two exogenous permanent fare increases, and estimate an elasticity of labour supply of −0.2, implying that income effects dominate substitution effects in the long-run labour supply of males.

Suggested Citation

Ashenfelter, Orley C. and Doran, Kirk and Schaller, Bruce, A Shred of Credible Evidence on the Long-Run Elasticity of Labour Supply. Economica, Vol. 77, No. 308, pp. 637-650, October 2010. Available at SSRN: https://ssrn.com/abstract=1681693 or http://dx.doi.org/10.1111/j.1468-0335.2010.00858.x

Orley C. Ashenfelter (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4040 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Kirk Doran

University of Notre Dame ( email )

361 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Bruce Schaller

affiliation not provided to SSRN ( email )

No Address Available

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