Review of Estimates of the Frisch Elasticity of Labor Supply: Working Paper 2012-13

by Sabrina I. Pacifici on October 25, 2012

Review of Estimates of the Frisch Elasticity of Labor Supply, Felix Reichling and Charles Whalen, Ocotber 2012

  • “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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