Publication Date

10-2012

Abstract

Among the models that CBO uses to analyze the economic effects of changes in federal fiscal policy is a life-cycle growth model. That model requires an estimate of the responsiveness of the supply of labor to a one-time temporary change in after-tax compensation, which is described by the so-called Frisch elasticity. CBO incorporates into its analyses an estimate of the Frisch elasticity that ranges from 0.27 to 0.53, with a central estimate of 0.40. This paper describes how CBO derived that range from the research literature.

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Suggested Citation
Reichling, F. & Whalen, C. (2012). Review of estimates of the Frisch Elasticity of labor supply. Washington, DC: Congressional Budget Office.

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