From Individual to Aggregate Labor Supply: A Quantitative Analysis Based on a Heterogeneous Agent Macroeconomy

FRB Richmond Working Paper No. 03-5

40 Pages Posted: 3 Dec 2012

See all articles by Yongsung Chang

Yongsung Chang

University of Rochester - Department of Economics; Yonsei University - Department of Economics

Sun-Bin Kim

Concordia University, Quebec - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2003

Abstract

We investigate the mapping from individual to aggregate labor supply using a general equilibrium heterogeneous-agent model with an incomplete market. The nature of heterogeneity among workers is calibrated using wage data from the PSID. The gross worker flows between employment and nonemployment and the cross-sectional earnings and wealth distributions in our model are comparable to those in the micro data. We find that the aggregate labor supply elasticity of such an economy is around 1, bigger than micro estimates but smaller than those often assumed in aggregate models.

Keywords: aggregate labor supply elasticity, heterogeneity, indivisible labor

JEL Classification: E24, E32, J21, J22

Suggested Citation

Chang, Yongsung and Kim, Sun-Bin, From Individual to Aggregate Labor Supply: A Quantitative Analysis Based on a Heterogeneous Agent Macroeconomy (July 1, 2003). FRB Richmond Working Paper No. 03-5, Available at SSRN: https://ssrn.com/abstract=2184539 or http://dx.doi.org/10.2139/ssrn.2184539

Yongsung Chang (Contact Author)

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627
United States

Yonsei University - Department of Economics ( email )

50 Yonsei-Ro
Seoul, 120-749
Korea

Sun-Bin Kim

Concordia University, Quebec - Department of Economics ( email )

1455 de Maisonneuve Blvd., W.
Montreal, Quebec H3G 1MB
Canada
514-848-3923 (Phone)

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