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Working Paper
From individual to aggregate labor supply : a quantitative analysis based on a heterogeneous agent macroeconomy
We investigate the mapping from individual to aggregate labor supply using a general equilibrium heterogeneous-agent model with an incomplete market. The nature of heterogeneity among workers is calibrated using wage data from the PSID. The gross worker flows between employment and nonemployment and the cross-sectional earnings and wealth distributions in our model are comparable to those in the micro data. We find that the aggregate labor supply elasticity of such an economy is around 1, bigger than micro estimates but smaller than those often assumed in aggregate models.
Working Paper
Heterogeneity and aggregation in the labor market : implications for aggregate preference shifts
The cyclical behavior of hours of work, wages, and consumption does not conform with the prediction of the representative agent with standard preferences. The residual in the intra-temporal first-order condition for commodity consumption and leisure is often viewed as a failure of labor-market clearing. We show that a simple heterogeneous agent economy with incomplete markets and indivisible labor generates an aggregation error that looks much like the preference residual in aggregate data. Our results caution against viewing the preference residual as a failure of labor-market clearing or a ...
Journal Article
On the aggregate labor supply