SOEPpapers on Multidisciplinary Panel Data Research 525
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. Measurement differences are 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 thought. Differences exist nonetheless and are found not to arise from different tax-benefit systems or demographic compositions across countries. Thus, we cannot reject that countries have genuinely different preferences. Three other results, important for welfare analysis, are consistent over all countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; 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 spouses' household production in Europe.
household labor supply elasticity taxation Europe US