Comparing Macro and Micro Estimates of the Elasticity of Labor Supply on Wages: Evidence from Russian Market. A Sensitivity Analysis

Student: Mishkin Maxim

Educational Programme: Economics (Master)

Year of Graduation: 2016

In order to better explanation of the observed dispersion in the aggregate number of hours of work during the business cycle, the elasticity of labor supply should be in the range of 2 to 4. On the other hand, current estimates of the elasticity of labor supply based on microeconometric models are in the range from 0 to 0.54. The work carried out systematization of the existing approaches, explaining the presence of the gap. The key idea is that the macroeconomic evaluation includes not only extensive margins , but also it covers the entire population (as opposed to microeconometric research focused on homogeneous subset of the general population). By easing these restrictions imposed on the microeconomic model of labor flexibility, the author estimates the elasticity of labor supply close enough to the calibration values of the macro models.

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