Associate Professor
Department of Economics,
University of
Toronto,
150 St. George St., Toronto, ON M5S 3G7
Canada
Tel: (905) 569-4895, Fax: (416) 978-6713
Email:
g.kambourov@utoronto.ca
Webpage:
http://www.chass.utoronto.ca/~gkambour
Abstract: We build
a heterogeneous life-cycle model which captures a large number of salient
features of individual labor supply, by education, over the life cycle.
The model provides an aggregation theory of individual labor supply,
firmly grounded on micro evidence, and is used to study the aggregate
labor supply responses to changes in the economic environment. We find
that the aggregate labor supply elasticity to a transitory wage shock is
1.27, with the extensive margin accounting for 54% of the response.
Furthermore, we also simulate the 1987 tax holiday in Iceland -- a
quasi-natural experiment -- and find that the aggregate labor supply
responses in the model are similar to those actually observed in Iceland.