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Title:Labor supply elasticities in Europe and the US PDF Logo
Authors:Bargain, Olivier
Orsini, Kristian
Peichl, Andreas
Issue Date:2011
Series/Report no.:EUROMOD Working Paper EM1/11
Abstract:Despite numerous studies on labor supply, the size of elasticities is rarely comparable across countries. In this paper, we suggest the first large-scale international comparison of elasticities, while netting out possible differences due to methods, data selection and the period of investigation. We rely on comparable data for 17 European countries and the US, a common empirical approach and a complete simulation of tax-benefit policies affecting household budgets. We find that wage-elasticities are small and vary less across countries than previously thought, e.g., between .2 and .6 for married women. Results are robust to several modelling assumptions. We show that differences in tax-benefit systems or demographic compositions explain little of the cross-country variation, leaving room for other interpretations, notably in terms of heterogeneous work preferences. We derive important implications for research on optimal taxation.
Subjects:household labor supply
elasticity
taxation
Europe
US
JEL:C25
C52
H31
J22
Document Type:Working Paper
Appears in Collections:EUROMOD Working Paper Series, Institute for Social and Economic Research (ISER), University of Essex

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