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  3. American Economic Review
  4. May 2011
  5. Interpreting Labor Supply Regressions in a Model of Full- and Part-Time Work

Interpreting Labor Supply Regressions in a Model of Full- and Part-Time Work

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Abstract

We construct a family model of labor supply that features adjustment along both the intensive and extensive margin. Intensive margin adjsutment is restricted to two values: full-time work and part-time work. Using simulated data from the steady state of the calibrated model, we examine whether standard labor supply regressions can uncover the true value of the intertemporal elasticity of labor supply parameter. We find positive estimated elasticities that are larger for women and that are highly significant, but they bear virtually no relationship to the underlying preference parameters.

Citation

Chang, Yongsung, Sun-Bin Kim, Kyooho Kwon, and Richard Rogerson. 2011. "Interpreting Labor Supply Regressions in a Model of Full- and Part-Time Work." American Economic Review, 101 (3): 476-81. DOI: 10.1257/aer.101.3.476

JEL Classification

  • C52 Model Evaluation, Validation, and Selection
  • J22 Time Allocation and Labor Supply