Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins

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Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins

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Title: Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins
Author: Chetty, Nadarajan; Guren, Adam Michael; Day, Manoli; Weber, Andrea

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Citation: Chetty, Raj, Adam Guren, Day Manoli, and Andrea Weber. 2011. Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins. American Economic Review 101(3): 471–475.
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Abstract: We evaluate whether state-of-the-art macro models featuring indivisible labor are consistent with modern quasi-experimental micro evidence by synthesizing evidence on both the intensive and extensive margins. We find that micro estimates are consistent with macro estimates of the steady-state (Hicksian) elasticities relevant for cross-country comparisons on both the extensive and intensive margins. However, micro estimates of intertemporal substitution (Frisch) elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences. The key puzzle to be resolved is why micro and macro estimates of the Frisch extensive margin elasticity are so different.
Published Version: doi:10.1257/aer.101.3.471
Other Sources: http://scholar.harvard.edu/sites/scholar.iq.harvard.edu/files/chetty/files/micro_macro_aerpp.pdf
http://obs.rc.fas.harvard.edu/chetty/micro_macro_aerpp.pdf
http://weber.vwl.uni-mannheim.de/fileadmin/user_upload/weber/micro_macro_aerpp.pdf
http://www.econ.ucla.edu/dsmanoli/extmarg_aerpp.pdf
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:11878970
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