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WP 2012-17: The Frisch elasticity in a labor market with high job mobility

WP 2012-17
TitleThe Frisch elasticity in a labor market with high job mobility
Original titleLa elasticidad de oferta laboral de Frisch en economías con alta movilidad laboral
Author(s) Nikita Céspedes and Silvio Rendón
Language Spanish
Date 2012/10/31
Abstract

In this paper we estimate Frisch elasticity in a labor market with high job mobility. We perform a fixed effects estimation following MaCurdy (1981) with a Heckman selection correction. The positive slope of the labor supply is identified by using instrumental variables related to changes in returns to education and experience. We use firm size as a labor demand shifter. We use data from the Permanent Employment Survey of Lima and find that Frisch elasticity is around 0.38, which indicates a relatively flexible labor market. Moreover, we find that this flexibility increases over time as well as income and hours of work.

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