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Calculation of the elasticity of labour offer

PostPosted: Fri Jul 18, 2014 11:56 pm
by camara_cmb
Hello

Im working with a very basic RBC model in my Advance Macro class. It s a typical problem of a social planner choosing consumption levels and hours of work for identical houses, a cobb douglas production function with a TFP shock, and a government expenditure shock.
The assingment is to calculate the elasticity of the labour offer with different forms of utility functions in terms of the log-linealized aproximation of the steady state. I have a specific calibration of some of the parameters, and some free parameters to be calculate. I know how to get the FCO of the level of consumption and of the hours of work, but from that point on, I dont know how to calculate the elasiticity.
Any comment or example will be more than welcomed!
Thank you

Re: Calculation of the elasticity of labour offer

PostPosted: Sun Jul 20, 2014 6:54 am
by jpfeifer
You need to be more precise. The elasticity of what with respect to what? If you are talking about the Frisch elasticity, see Domeij/Floden (2006) - The labor-supply elasticity and borrowing constraints

Re: Calculation of the elasticity of labour offer

PostPosted: Mon Aug 25, 2014 7:15 am
by usamovnaurbi
Elasticity is a means of measuring responsiveness. Look out the relative change in employment level for a relative change in the wage:

Elasticity of Labor Demand = % change in employment / % change in wage

If the wage goes up, employment will go down (all else constant.) If the wage goes down, employment will go up (all else constant.)