Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply

67 Pages Posted: 6 Jul 2015 Last revised: 7 Oct 2021

See all articles by Orazio Attanasio

Orazio Attanasio

Dept of Economics Yale University; Institute for Fiscal Studies (IFS); University College London - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Peter Levell

Institute for Fiscal Studies (IFS)

Hamish Low

Institute for Fiscal Studies (IFS); University of Oxford

Virginia Sánchez-Marcos

University of Cantabria - Department of Economics

Date Written: July 2015

Abstract

We estimate labour supply elasticities at the micro level and show what we can learn from possibly very heterogeneous elasticities for aggregate behaviour. We consider both intertemporal and intratemporal choices, and identify intensive and extensive responses in a consistent life-cycle framework, using US CEX data. There is substantial heterogeneity in how individuals respond to wage changes at all margins, both due to observables, such as age, wealth, hours worked and the wage level as well as to unobservable tastes for leisure. We estimate the distribution of Marshallian elasticities for hours worked to have a median value of 0.18, and corresponding Hicksian elasticities of 0.54 and Frisch elasticities of 0.87. At the 90th percentile, these values are 0.79, 1.16, and 1.92. Responses at the extensive margin are important, explaining about 54% of the total labour supply response for women under 30, although this importance declines with age. We show that aggregate elasticities are cyclical, being larger in recessions and particularly so in long recessions. This heterogeneity at the micro level means that the aggregate labour supply elasticity is not a structural parameter: any aggregate elasticity will depend on the demographic structure of the economy as well as the distribution of wealth and the particular point in the business cycle.

Suggested Citation

Attanasio, Orazio and Levell, Peter and Low, Hamish and Low, Hamish and Sánchez-Marcos, Virginia, Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply (July 2015). NBER Working Paper No. w21315, Available at SSRN: https://ssrn.com/abstract=2626989

Orazio Attanasio (Contact Author)

Dept of Economics Yale University ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 20 7679 5880 (Phone)
+44 20 7916 2775 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter Levell

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Hamish Low

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

University of Oxford ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

Virginia Sánchez-Marcos

University of Cantabria - Department of Economics ( email )

Av. Los Castros s/n
Santander 39005, Cantabria 39005
Spain

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
7
Abstract Views
363
PlumX Metrics