A Labor Supply Elasticity Accord? | Zendy

Lars Ljungqvist | Zendy; Thomas J. Sargent | Zendy

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A Labor Supply Elasticity Accord?

Author(s) -

Lars Ljungqvist,

Thomas J. Sargent

Publication year - 2011

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.101.3.487

Subject(s) - economics , elasticity (physics) , macro , price elasticity of supply , aggregate supply , business cycle , microeconomics , price elasticity of demand , labour economics , aggregate demand , keynesian economics , monetary policy , physics , computer science , thermodynamics , programming language

A dispute about the size of the aggregate labor supply elasticity has been fortified by a contentious aggregation theory used by real business cycle theorists. The replacement of that aggregation theory with one more congenial to microeconomic observations opens possibilities for an accord about the aggregate labor supply elasticity. The new aggregation theory drops features to which empirical microeconomists objected and replaces them with life-cycle choices. Whether the new aggregation theory ultimately indicates a small or large macro labor supply elasticity will depend on how shocks and government institutions interact to put workers at interior solutions for career length.

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