Robust Inference for the Frisch Labor Supply Elasticity

• 成果类型: Article
• 署名作者: Keane, Michael; Neal, Timothy
• 署名单位: Johns Hopkins University; University of New South Wales Sydney
• 刊物名称: JOURNAL OF LABOR ECONOMICS
• ISSN/ISSBN: 0734-306X
• DOI: 10.1086/732771
• 发表日期: 2025
• 页码: S179-S219
• 关键词: instrumental variables regression; intertemporal substitution; micro; gmm; taxes; MODEL

摘要

Many studies estimate the Frisch elasticity via two-stage least squares (2SLS) regression of hours changes on wage changes. However, 2SLS suffers from a power asymmetry problem that makes estimates far away from ordinary least squares appear spuriously imprecise. Hence, it is difficult for t-tests to detect a positive Frisch elasticity. We illustrate the problem using NLSY97 data. We estimate an elasticity of 0.60 for young men, but the t-test indicates that it is insignificant. The Anderson-Rubin (AR) test, which avoids the power asymmetry problem, indicates that it is highly significant. We argue that the AR test should be widely adopted in lieu of the t-test in instrumental variable applications.