Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56163
Authors: 
Domeij, David
Flodén, Martin
Year of Publication: 
2001
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 480
Abstract: 
The labor-supply elasticity is a central element in many macroeconomic models. We argue that assumptions underlying previous econometric estimates of the intertemporal labor supply elasticity are inconsistent with incomplete markets economies. In particular, if the econometrician ignores borrowing constraints, the elasticity will be biased downwards. Within our model, the bias may be up to 50 percent. We find a similar bias in PSID data.
Subjects: 
labor supply elasticity
intertemporal substitution
liquidity constraints
JEL: 
C20
C50
E20
J22
Document Type: 
Working Paper

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