Labor Supply Elasticities in Europe and the US

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Title: Labor Supply Elasticities in Europe and the US
Authors: Bargain, Olivier
Orsini, Kristian
Peichl, Andreas
Permanent link: http://hdl.handle.net/10197/6390
Date: Jul-2011
Abstract: Despite numerous studies on labor supply, the size of elasticities is rarely comparable across countries. In this paper, we suggest the first large-scale international comparison of elasticities, while netting out possible differences due to methods, data selection and the period of investigation. We rely on comparable data for 17 European countries and the US, a common empirical approach and a complete simulation of tax-benefit policies affecting household budgets. We find that wage-elasticities are small and vary less across countries than previously thought, e.g., between .2 and .6 for married women. Results are robust to several modeling assumptions. We show that differences in tax-benefit systems or demographic compositions explain little of the cross-country variation, leaving room for other interpretations, notably in terms of heterogeneous work preferences. We derive important implications for research on optimal taxation.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Household labor supply;Elasticity;Taxation;Europe;US
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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