Working Paper: NBER ID: w13017
Authors: Richard Rogerson; Johanna Wallenius
Abstract: We build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work. We find that changes in taxes have large aggregate effects on hours of work. Moreover, we find that there is no inconsistency between this result and the empirical finding of small labor elasticities for prime age workers. In our model, micro and macro elasticities are effectively unrelated. Our model is also consistent with other cross-country patterns.
Keywords: No keywords provided
JEL Codes: E2; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Changes in tax policies (H29) | aggregate hours of work (J22) |
| Increases in tax and transfer policies (H29) | reduction in labor supply (J22) |
| Differences in employment ratios (J79) | variations among younger and older individuals (J14) |
| Interaction between intensive and extensive margins (C24) | adjustment on the intensive margin (J29) |