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

By Olivier Bargain, Kristian Orsini, Andreas Peichl. Social Science Research Network, 2012

138 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Gender Studies

View Paper: https://www.semanticscholar.org/paper/198475dd9546cd85881346580a3f8177b0d5490a

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In Economics and Econometrics

1. F. Figari
2. Holly Sutherland

In Gender Studies

1. Holly Sutherland
2. F. Figari
3. M. Ravallion

Citations in the corpus

• EUROMOD: the European Union tax-benefit microsimulation model (2012, methodology): “…labor supply estimated preferences and elasticities are a key ingredient in a series of papers on the optimality of tax systems and welfare regimes (Bargain et al., 2011; 2012a; Bourguignon and Spadaro, 2012; Immervoll et al., 2007; 2011) and the cross-country perspective offered by EUROMOD proves…”
• Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany (2018, unknown): “This finding could be explained with the higher labor supply elasticities of women (Bargain et al., 2014) in monopsonistic labor markets, as stated by Result 7 of our theory.”