On the measurement of the elasticity of labour
Journal
European Economic Review
ISSN
0014-2921
Type
journal article
Date Issued
2021-10
Author(s)
Abstract
We use a simple theoretical framework, a building block of many macroeconomic models, to study the prominently debated relationship between the model parametrisation of the Frisch elasticity and the reduced-form evidence on the elasticity of labour. Focusing on tax holidays, we show that the elasticity measured with a reduced-form approach is only equal to the Frisch-elasticity parameter if there are no income or general equilibrium effects. Furthermore, for a wide range of standard values of the Frisch-elasticity parameter, the response of labour generated by a tax holiday in the model is aligned with the reduced-form evidence.
Language
English
Keywords
Frisch Elasticity
Labour Supply
Aggregate Hours
Tax Holidays.
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
Elsevier
Volume
139
Subject(s)
Division(s)
Eprints ID
264294
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Name
EEREV-D-21-00165_manuscript.pdf
Size
524.5 KB
Format
Adobe PDF
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