Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply

Orazio Attanasio, Peter Levell, Hamish Low, Virginia Sánchez-Marcos

NBER Working Paper No. 21315
Issued in July 2015, Revised in February 2018
NBER Program(s):Economic Fluctuations and Growth

We estimate labour supply elasticities at the micro level and show what we can learn from possibly very heterogeneous elasticities for aggregate behaviour. We consider both intertemporal and intratemporal choices, and identify intensive and extensive responses in a consistent life-cycle framework, using US CEX data. There is substantial heterogeneity in how individuals respond to wage changes at all margins, both due to observables, such as age, wealth, hours worked and the wage level as well as to unobservable tastes for leisure. We estimate the distribution of Marshallian elasticities for hours worked to have a median value of 0.18, and corresponding Hicksian elasticities of 0.54 and Frisch elasticities of 0.87. At the 90th percentile, these values are 0.79, 1.16, and 1.92. Responses at the extensive margin are important, explaining about 54% of the total labour supply response for women under 30, although this importance declines with age. We show that aggregate elasticities are cyclical, being larger in recessions and particularly so in long recessions. This heterogeneity at the micro level means that the aggregate labour supply elasticity is not a structural parameter: any aggregate elasticity will depend on the demographic structure of the economy as well as the distribution of wealth and the particular point in the business cycle.

download in pdf format
   (656 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21315

Users who downloaded this paper also downloaded* these:
Bertanha and Imbens w20773 External Validity in Fuzzy Regression Discontinuity Designs
Yi, Heckman, Zhang, and Conti w20757 Early Health Shocks, Intrahousehold Resource Allocation, and Child Outcomes
Nevo and Wong w21318 The Elasticity of Substitution Between Time and Market Goods: Evidence from the Great Recession
Keane and Rogerson w17430 Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective
Blundell, Costa Dias, Meghir, and Shaw w19007 Female Labour Supply, Human Capital and Welfare Reform
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us