Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236257 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14226
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
The Frisch elasticity of labor supply can be estimated by regressing hours worked on the hourly wage rate, controlling for consumption of the individual worker. However, most household panel surveys contain consumption information only at the household level. We show that proxying individual consumption by household consumption biases estimated Frisch elasticities downward as limited commitment in the household induces individual consumption to behave differently from household consumption. We develop an improved estimation approach that eliminates this bias by exploiting information on the composition of household consumption to infer its distribution. Using PSID data, we estimate Frisch elasticities of about 0.7.
Subjects: 
labor-supply elasticity
limited commitment
intra-household decision making
couple households
consumption
JEL: 
D13
D15
J12
J22
E21
E24
Document Type: 
Working Paper

Files in This Item:
File
Size
461.78 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.