Labor Supply Empirical Findings For prime-age males(ages 20 to 60), effect of changes in the net wage on hours of work is small Elasticity of 0.05, meaning that a 10% increase in the wage increase hours of work by 12% Elasticities for women vary widely, but married women seem quite sensitive to changes in the net wage 16
16 Labor Supply: Empirical Findings • For “prime-age” males (ages 20 to 60), effect of changes in the net wage on hours of work is small. – Elasticity of 0.05, meaning that a 10% increase in the wage increase hours of work by ½%. • Elasticities for women vary widely, but married women seem quite sensitive to changes in the net wage
Labor Supply Some Caveats Demand-side considerations Large influx of workers could lower equilibrium wage or change consumption patterns Individual versus group effects Effects of tax policy could have ambiguous effects; some may increase work and other may decrease work 17
17 Labor Supply: Some Caveats • Demand-side considerations – Large influx of workers could lower equilibrium wage or change consumption patterns • Individual versus group effects – Effects of tax policy could have ambiguous effects; some may increase work and other may decrease work