Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities

Dayanand Manoli, Andrea Weber, Adam Guren and Raj Chetty

No 73, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: Macroeconomic calibrations imply much larger labor supply elasticities than microeconometric studies. The most well known explanation for this divergence is that indivisible labor generates extensive margin responses that are not captured in micro studies of hours choices. We evaluate whether existing calibrations of macro models are consistent with micro evidence on extensive margin responses using two approaches. First, we use a standard calibrated macro model to simulate the impacts of tax policy changes on labor supply. Second, we present a meta-analysis of quasi-experimental estimates of extensive margin elasticities. We find that micro estimates are consistent with macro evidence on the steady-state (Hicksian) elasticities relevant for cross-country comparisons. However, micro estimates of extensive-margin elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours. Hence, indivisible labor supply does not explain the large gap between micro and macro estimates of intertemporal substitution (Frisch) elasticities.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2011/paper_73.pdf (application/pdf)

Related works:
Journal Article: Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities (2013)
Working Paper: Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities (2013)
Chapter: Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities (2012)
Working Paper: Does Indivisible Labor Explain the Difference Between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed011:73

Access Statistics for this paper

More papers in 2011 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().