Are micro and macro labor supply elasticities consistent? A review of evidence on the intensive and extensive margins

Raj Chetty, Adam Guren, Day Manoli, Andrea Weber

Research output: Contribution to journalArticlepeer-review

Abstract (may include machine translation)

We evaluate whether state-of-the-art macro models featuring indivisible labor are consistent with modern quasi-experimental micro evidence by synthesizing evidence on both the intensive and extensive margins. We find that micro estimates are consistent with macro estimates of the steady-state (Hicksian) elasticities relevant for cross-country comparisons on both the extensive and intensive margins. However, micro estimates of intertemporal substitution (Frisch) elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences. The key puzzle to be resolved is why micro and macro estimates of the Frisch extensive margin elasticity are so different.

Original languageEnglish
Pages (from-to)471-475
Number of pages5
JournalAmerican Economic Review
Volume101
Issue number3
DOIs
StatePublished - May 2011
Externally publishedYes

Fingerprint

Dive into the research topics of 'Are micro and macro labor supply elasticities consistent? A review of evidence on the intensive and extensive margins'. Together they form a unique fingerprint.

Cite this