Intertemporal labor supply and involuntary unemployment
We estimate a model of intertemporal male labor supply behavior which explicitly accounts for the effect of income taxation and the transfer system. Moreover, we model the demand-side driven rationing risk that prevents agents from choosing the optimal labor supply state. Our results show that elasticities derived in an unconstrained pure choice model are significantly higher compared to a model with involuntary unemployment. This holds true for short-run and long-run labor supply elasticities.
KeywordsIntertemporal labor supply behavior Involuntary unemployment Tax and transfer system
JEL ClassificationC23 C25 J22 J64
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