Publication and Identification Biases in Measuring the Intertemporal Substitution of Labor Supply

The intertemporal substitution (Frisch) elasticity of labor supply governs the predictions of real business cycle models and models of taxation. We show that, for the extensive margin elasticity, two biases conspire to systematically produce large positive estimates when the elasticity is in fact zero. Among 723 estimates in 36 studies, the mean reported elasticity is 0.5. One half of that number is due to publication bias: larger estimates are reported preferentially. The other half is due to identification bias: studies with less exogenous time variation in wages report larger elasticities. Net of the biases, the literature implies a zero mean elasticity and, with 95% confidence, is inconsistent with calibrations above 0.25. To derive these results we collect 23 variables that reflect the context in which the elasticity was obtained, use nonlinear techniques to correct for publication bias, and employ Bayesian and frequentist model averaging to address model uncertainty.

Estimating intertemporal elasticity of substitution of labor supply for married women in Russia

This paper provides an econometric analysis of the labor supply function of married women in Russia based on data from RLMS HSE and methodology from the work (Heckman, MaCurdy, 1980), in which decisions about entering the labor market and the intensity of work are made within a dynamic optimization problem. It is shown that the husband’s leisure and the number of children living in the household have a negative effect on the woman’s hours worked. The estimate of the Frisch elasticity of labor supply with respect to wages lies near 0.16.