Labor Supply Elasticities in Europe and the US

Despite numerous studies on labor supply, the size of elasticities is rarely comparable acrosscountries. In this paper, we suggest the first large-scale international comparison ofelasticities, while netting out possible differences due to methods, data selection and theperiod of investigation. We rely on comparable data for 17 European countries and the US, acommon empirical approach and a complete simulation of tax-benefit policies affectinghousehold budgets. We find that wage-elasticities are small and vary less across countriesthan previously thought, e.g., between .2 and .6 for married women. Results are robust toseveral modeling assumptions. We show that differences in tax-benefit systems ordemographic compositions explain little of the cross-country variation, leaving room for otherinterpretations, notably in terms of heterogeneous work preferences. We derive importantimplications for research on optimal taxation....