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 incomplete market. Heterogeneity of the workforce is designed such that the evolution of wages, worker flows between employment and nonemployment, and cross-sectional earnings distribution are consistent with 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