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Title: Intertemporal Substitution in Labor Supply: Evidence from a Pseudo Panel

Citation Type: Miscellaneous

Publication Year: 2011

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Abstract: The level of the Frisch labor supply elasticity, as well as the pro file over the lifetime are essential for welfare analysis of many policy changes in general equilibrium models. This paper uses a pseudo panel to examine two open questions with regards to the Frisch labor supply elasticity. First, can the diff erence between the macroeconomic calibration values and microeconometric estimates of the Frisch elasticity be explained by the extensive margin? Second, what is the shape of the Frisch labor supply elasticity profi le? With regard to the first question, including only the intensive margin, I find estimates of the Frisch elasticity between 0.6-0.64.Including both the intensive and extensive margins, the elasticity estimates increase to 1.86-2.11. The diff erence between the two ranges indicates that the impact of the extensive margin is large enough to explain the diff erence between previous micro estimates of the Frisch elasticityand macro calibration values. With regard to the second question, the Frisch elasticity profi le including just the intensive margin is at over the working life. Including both the intensive and extensive margin, the Frisch elasticity profi le is at until the age of 55, at which point it increases a statistically signifi cant amount.

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Authors: Peterman, William B.

Publisher: University of California, San Diego

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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