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Comparing Labor Supply Elasticities in Europe and the US: New Results

Author

Listed:
  • Olivier Bargain

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and IZA)

  • Christina Orsini

    (U. of Leuven)

  • Andreas Peichl

    (IZA, U. of Cologne, CESifo and ISER)

Abstract
We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status, with measurement differences netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously considered. Nonetheless, such differences do exist, and are found not to arise from different tax-benefit systems, wage/hour level or demographic compositions across countries, suggesting genuine differences in work preferences across countries. Furthermore, three other important results for welfare analysis are consistent across countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; and income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses' leisure in the US versus substitution in their household production in Europe.

Suggested Citation

  • Olivier Bargain & Christina Orsini & Andreas Peichl, 2013. "Comparing Labor Supply Elasticities in Europe and the US: New Results," AMSE Working Papers 1321, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:1321
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    More about this item

    Keywords

    household labor supply; elasticity; taxation; Europe; US.;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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