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Predicting the path of labor supply responses when state dependence matters
Labour Economics ( IF 2.2 ) Pub Date : 2021-05-23 , DOI: 10.1016/j.labeco.2021.102004
Zhiyang Jia , Trine Engh VattØ

The standard labor supply model ignores possible inertia originating from individuals’ previous labor supply decisions and assumes immediate adjustments to policy reforms. In this study we develop a model where past labor market status have effects on present decisions: first, there is habit dependence in the taste for leisure; second, labor market opportunities reflect experiences of the previous period; and third, there is a disutility of deviating from the choice of last period (status quo). All these three components induce state dependence in labor supply behavior and gradual rather than immediate responses to tax and benefit reforms. The model is estimated with data of Norwegian females over the period 2003 - 2009. Simulation results from a tax rate change suggest that state dependence bring down the short-term (first-year) responses to one-third of the full effect, and the full effect is reached after about five years. Our results also suggest that the disutility of deviating from status quo, modeled as a fixed cost of switching, is the dominant driving force of sluggishness in labor supply responses.



中文翻译:

当国家依赖很重要时预测劳动力供应反应的路径

标准的劳动力供给模型忽略了源自个人先前劳动力供给决策的可能惯性,并假设对政策改革进行即时调整。在这项研究中,我们开发了一个模型,其中过去的劳动力市场状况对当前决策有影响:首先,休闲品味存在习惯依赖性;第二,劳动力市场机会反映了前一时期的经验;第三,偏离上一期(现状)的选择是无用的。所有这三个组成部分都会导致国家对劳动力供应行为的依赖以及对税收和福利改革的渐进而非即时反应。该模型是根据 2003 年至 2009 年期间挪威女性的数据估算的。税率变化的模拟结果表明,国家依赖将短期(第一年)响应降低到全部效应的三分之一,并在大约五年后达到全部效应。我们的结果还表明,偏离现状的无用性(建模为转换的固定成本)是劳动力供应反应迟缓的主要驱动力。

更新日期:2021-06-11
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