[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp5993.html
   My bibliography  Save this paper

The Frisch Elasticity in the Mercosur Countries: A Pseudo-Panel Approach

Author

Listed:
  • González, Roberto

    (Universitat Autònoma de Barcelona)

  • Sala, Hector

    (Universitat Autònoma de Barcelona)

Abstract
This paper provides estimates for the Mercosur countries of the Frisch elasticity – i.e., the elasticity of substitution between worked hours and real wages holding constant the marginal utility of wealth. We find a strong heterogeneity, with estimated elasticities ranging from 12.8 in Argentina to -13.1 in Paraguay. Brazil and Uruguay are in between, both with negative values of -1.9 and -1.4, respectively. We argue that the existence of severe liquidity constraints is the main reason behind the negative estimates found in Brazil, Paraguay and Uruguay. The heterogeneity of these estimates is the outcome of differences in many relevant economic dimensions – ranging from sectorial specialization to welfare state provisions and labor market specificities – all of them crucially affecting the socioeconomic situation of individuals. The diversity of Frisch elasticities calls for the development of a cross-country (rather than a within-country) policy approach, since they crucially affect the dynamics of the business cycle and business cycle synchronization is a step prior to the design of macro-convergence policies in the Mercosur context.

Suggested Citation

  • González, Roberto & Sala, Hector, 2011. "The Frisch Elasticity in the Mercosur Countries: A Pseudo-Panel Approach," IZA Discussion Papers 5993, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5993
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp5993.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dessing, Maryke, 2002. "Labor supply, the family and poverty: the S-shaped labor supply curve," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 433-458, December.
    2. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 176-215, June.
    3. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    4. Sumru Altuğ & Robert A. Miller, 1998. "The Effect of Work Experience on Female Wages and Labour Supply," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(1), pages 45-85.
    5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    6. Martin Browning & M. Dolores Collado, 2001. "The Response of Expenditures to Anticipated Income Changes: Panel Data Estimates," American Economic Review, American Economic Association, vol. 91(3), pages 681-692, June.
    7. Trabandt, Mathias & Uhlig, Harald, 2006. "How far are we from the slippery slope? The Laffer curve revisited," SFB 649 Discussion Papers 2006-023, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    8. Guido W. Imbens & Whitney K. Newey, 2009. "Identification and Estimation of Triangular Simultaneous Equations Models Without Additivity," Econometrica, Econometric Society, vol. 77(5), pages 1481-1512, September.
    9. Kuroda, Sachiko & Yamamoto, Isamu, 2008. "Estimating Frisch labor supply elasticity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 566-585, December.
    10. Moffitt, Robert, 1993. "Identification and estimation of dynamic models with a time series of repeated cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 99-123, September.
    11. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 28(Jul), pages 2-13.
    12. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2013. "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 1-56.
    13. Jim Airola, 2008. "Labor supply in response to remittance income: the case of Mexico," Journal of Developing Areas, Tennessee State University, College of Business, vol. 41(2), pages 69-78, January-M.
    14. Agénor, Pierre-Richard & Bayraktar, Nihal, 2010. "Contracting models of the Phillips curve empirical estimates for middle-income countries," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 555-570, June.
    15. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    16. Richard W. Blundell & James L. Powell, 2004. "Endogeneity in Semiparametric Binary Response Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(3), pages 655-679.
    17. Richard Blundell & Pierre-Andre Chiappori & Thierry Magnac & Costas Meghir, 2007. "Collective Labour Supply: Heterogeneity and Non-Participation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 417-445.
    18. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-1085, December.
    19. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    20. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    21. Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2277-2292, November.
    22. Erickson, Timothy & Whited, Toni M., 2002. "Two-Step Gmm Estimation Of The Errors-In-Variables Model Using High-Order Moments," Econometric Theory, Cambridge University Press, vol. 18(3), pages 776-799, June.
    23. Carrasco, Marine & Florens, Jean-Pierre, 2000. "Generalization Of Gmm To A Continuum Of Moment Conditions," Econometric Theory, Cambridge University Press, vol. 16(6), pages 797-834, December.
    24. David Domeij & Martin Floden, 2006. "The Labor-Supply Elasticity and Borrowing Constraints: Why Estimates are Biased," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 242-262, April.
    25. Trabandt, Mathias & Uhlig, Harald, 2006. "How Far Are We From the Slippery Slope? The Laffer Curve Revisited," CEPR Discussion Papers 5657, C.E.P.R. Discussion Papers.
    26. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    27. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September.
    28. Altonji, Joseph G. & Martins, Ana Paula & Siow, Aloysius, 2002. "Dynamic factor models of consumption, hours and income," Research in Economics, Elsevier, vol. 56(1), pages 3-59, June.
    29. Gasparini Leonardo & Leonardo Tornaroli, 2009. "Labor Informality in Latin America and the Caribbean: Patterns and Trends from Household Survey Microdata," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, September.
    30. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, January.
    31. Paul J. Devereux, 2007. "Small-sample bias in synthetic cohort models of labor supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 839-848.
    32. John C. Ham, 1986. "Testing whether Unemployment Represents Intertemporal Labour Supply Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(4), pages 559-578.
    33. Jorge Notaro, 2009. "La reforma laboral en el Uruguay 2005–2009. Participación para la regulación," Documentos de Trabajo (working papers) 09-07, Instituto de Economía - IECON.
    34. Chang-Tai Hsieh, 2003. "Do Consumers React to Anticipated Income Changes? Evidence from the Alaska Permanent Fund," American Economic Review, American Economic Association, vol. 93(1), pages 397-405, March.
    35. Contreras, Juan & Sinclair, Sven, 2008. "Labor supply response in macroeconomic models: Assessing the empirical validity of the intertemporal labor supply response from a stochastic overlapping generations model with incomplete markets," MPRA Paper 10533, University Library of Munich, Germany.
    36. Melvin Stephens, 2008. "The Consumption Response to Predictable Changes in Discretionary Income: Evidence from the Repayment of Vehicle Loans," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 241-252, May.
    37. Ziliak, James P, 1997. "Efficient Estimation with Panel Data When Instruments Are Predetermined: An Empirical Comparison of Moment-Condition Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 419-431, October.
    38. Simon Burgess & Helene Turon, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies – A Comment," Bristol Economics Discussion Papers 05/573, School of Economics, University of Bristol, UK.
    39. World Bank, 2006. "Brazil : Interest Rates and Intermediation Spreads," World Bank Publications - Reports 21461, The World Bank Group.
    40. World Bank, 2011. "World Development Indicators 2011," World Bank Publications - Books, The World Bank Group, number 2315.
    41. Jane K. Dokko, 2008. "The effect of taxation on lifecycle labor supply: results from a quasi-experiment," Finance and Economics Discussion Series 2008-24, Board of Governors of the Federal Reserve System (U.S.).
    42. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, May.
    43. Bover, Olympia, 1991. "Relaxing Intertemporal Separability: A Rational Habits Model of Labor Supply Estimated from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 85-100, January.
    44. Blundell, Richard & MaCurdy, Thomas & Meghir, Costas, 2007. "Labor Supply Models: Unobserved Heterogeneity, Nonparticipation and Dynamics," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 69, Elsevier.
    45. Barbara Annicchiarico & Luisa Corrado & Alessandra Pelloni, 2008. "Volatility, Growth and Labour Elasticity," Working Paper series 32_08, Rimini Centre for Economic Analysis.
    46. Martin Ravallion, 2011. "A Comparative Perspective on Poverty Reduction in Brazil, China, and India," The World Bank Research Observer, World Bank, vol. 26(1), pages 71-104, February.
    47. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
    48. Robert E. Hall, 2009. "Reconciling Cyclical Movements in the Marginal Value of Time and the Marginal Product of Labor," Journal of Political Economy, University of Chicago Press, vol. 117(2), pages 281-323, April.
    49. Luigi Pistaferri, 2003. "Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labor Supply," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 729-754, July.
    50. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    51. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
    52. repec:rim:rimwps:32-08 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sosa-Padilla, César, 2018. "Sovereign defaults and banking crises," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 88-105.
    2. Zamnius, Alexey & Polbin, Andrey, 2021. "Estimating intertemporal elasticity of substitution of labor supply for married women in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 23-48.
    3. Céspedes Reynaga, Nikita & Rendon, Silvio, 2012. "The Frisch Elasticity in Labor Markets with High Job Turnover," IZA Discussion Papers 6991, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2013. "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 1-56.
    2. William B. Peterman, 2016. "Reconciling Micro And Macro Estimates Of The Frisch Labor Supply Elasticity," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 100-120, January.
    3. William Peterman, 2016. "The effect of endogenous human capital accumulation on optimal taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 46-71, July.
    4. Edward C. Prescott & Johanna Wallenius, 2012. "Aggregate labor supply," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 35(Oct).
    5. Michael Keane & Richard Rogerson, 2015. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 89-117, August.
    6. Bechlioulis, Alexandros P. & Brissimis, Sophocles N., 2021. "Identifying key aspects of household behavior in a representative agent framework," Economic Modelling, Elsevier, vol. 97(C), pages 105-117.
    7. Riccardo Fiorito & Giulio Zanella, "undated". "Labor Supply Elasticities: Can Micro be Misleading for Macro?," Working Papers 4, Department of the Treasury, Ministry of the Economy and of Finance.
    8. William B. Peterman, 2012. "An extensive look at taxes: how does endogenous retirement affect optimal taxation?," Finance and Economics Discussion Series 2012-28, Board of Governors of the Federal Reserve System (U.S.).
    9. repec:fip:fedmqr:y:2012:i:october:n:v.35no.2 is not listed on IDEAS
    10. Attanasio, Orazio & Low, Hamish & Sánchez-Marcos, Virginia & Levell, Peter, 2015. "Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply," CEPR Discussion Papers 10732, C.E.P.R. Discussion Papers.
    11. Richard Rogerson, 2011. "Individual and Aggregate Labor Supply with Coordinated Working Times," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 7-37, August.
    12. Ríos-Rull, José-Víctor & Schorfheide, Frank & Fuentes-Albero, Cristina & Kryshko, Maxym & Santaeulàlia-Llopis, Raül, 2012. "Methods versus substance: Measuring the effects of technology shocks," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 826-846.
    13. Michael Keane & Richard Rogerson, 2015. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 89-117, 08.

    More about this item

    Keywords

    Frisch elasticity; labor supply; liquidity constraints; Mercosur; life-cycle models; pseudo-panel (synthetic panel);
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp5993. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.