Year: 2008
Type: report
Abstract: Labor supply is unresponsive to permanent changes in wage rates.Thus, income and substitution effects cancel, but are they both close to zero or both large?This paper develops a theory of labor supply where income and substitution effects cancel, taking into account optimization over time, fixed costs of going to work, and interactions of labor supply decisions within the household.The paper then applies this theory to survey evidence on the response of labor supply to a large wealth shock.The evidence implies that the constant marginal utility of wealth (Frisch) elasticity of labor supply is about one.
DOI: 10.3386/w14208
Authors: Miles Kimball, Matthew Shapiro
Institutions: National Bureau of Economic Research, University of Michigan
Language: English
Subfield: Gender Studies
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2114108924