Income Elasticity Of Labor Supply

The column uses a model of female labour supply to show that there is substantial heterogeneity in both cross section and over the business cycle.

Income elasticity of labor supply. To understand the consequences of income tax changes for example we need to be explicit about whose tax is changing. Some of the key factors affecting the wage elasticity of supply of labour are as follows. In other words the frisch elasticity measures the substitution effect of a change in the wage rate on labor supply. The more complicated the skills and the higher or longer to achieve the qualifications required the more inelastic the supply.

The wage elasticity of supply of labour is the sensitivity of the supply of labour to a change in the wage rate. This is affected by the specific skills and educational requirements. The elasticity of the supply of labor refers to the degree to which the quantity supplied of labor will go up or down as wages increase or decrease. It is not possible to think about labour supply elasticity as a unique structural parameter.

If there is a high degree of elasticity the. Nature of skills and qualifications required to work in an industry. From wikipedia the free encyclopedia the frisch elasticity of labor supply captures the elasticity of hours worked to the wage rate given a constant marginal utility of wealth. In most cases the supply of labor has a fairly inelastic demand which means that a change in salary has a relatively small impact on the supply of labor this often depends on different professions.

Lengthy and costly training periods makes labour supply inelastic. It is named after the economist ragnar frisch.