Title

A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply

Author(s)

Orley Ashenfelter Orley Ashenfelter (Princeton University)

Kirk B. Doran Kirk Doran (University of Notre Dame)

Bruce Schaller Bruce Schaller (New York City Department of Transportation)

Abstract

The available estimates of the wage elasticity of male labor supply in the literature have varied between -0.2 and 0.2, implying that permanent wage increases have relatively small, poorly determined effects on labor supplied. The variation in existing estimates calls for a simple, natural experiment in which men can change their hours of work, and in which wages have been exogenously and permanently changed. We introduce a panel data set of taxi drivers who choose their own hours, and who experienced two exogenous permanent fare increases instituted by the New York City Taxi and Limousine Commission. Our preferred estimate suggests that their elasticity of labor supply is about -0.2.

Creation Date

2010-01

Section URL ID

CEPS

Paper Number

199

URL

https://gceps.princeton.edu/wp-content/uploads/2017/01/199ashenfelter.pdf

File Function

Jel

E270, E240, F160, J210, J400

Keyword(s)

male labor supply, effect of wage rates, long run labor supply, public policies, taxation, social safety nets, and redistribution of income, New York City Taxi and Limousine Commission, United States

Suppress

false

Series

3