Nuremberg Research Seminar in Economics on 20 December 2023 – LG 0.423
You are invited to join the weekly Nuremberg Research Seminar in Economics on 20 December 2023, from 13.15 to 14.45 pm. The seminar will be held in room LG 0.423. Jonna Olsson (Norwegian School of Economics) will be talking about „Who should work how much?”.
More information can be found here:
The aggregate amount of efficiency-weighted labor in the economy depends on both the total number of hours worked and the joint distribution of hours and productivity. From an efficiency perspective, high-productive individuals should work more. Yet, differences in actual hours worked across individuals are not so stark. We provide a theory of how the distribution of hours in the economy relates to the level of insurance households have access to. We use a labor-supply model in which individuals face realistic frictions in the financial market and calibrate it to capture both evidence over time and evidence across countries in terms of labor supply and observed wealth heterogeneity. We show that the model displays a low hours-wage correlation, as in the data, and that an income effect that dominates the substitution effect is key. We then ask what a frictionless model with this labor-supply formulation would imply for the distribution of hours worked. With access to perfect insurance, aggregate labor productivity would increase by 9.5 percent, while hours worked would decrease by 7.5 percent.