Fixed Costs, Work Schedules and the Elasticity of Labor Supply

Evgenia Dechter | University of New South Wales

This study develops a three-dimensional labor supply framework, distin- guishing between hours worked per day, days worked per week and work- weeks. Individuals make labor supply choices given heterogeneous schedule- dependent fixed costs of work. I empirically estimate the preference structure parameters and find that the three margins are not perfect substitutes. Using the estimates, I compute the aggregate elasticity of labor supply and find it to be above the standard range. The elasticity varies with work schedules and fixed costs of work, and it is higher for workers who are further away from corner solutions at any margin of labor supply.