The Heterogeneity and Dynamics of Individual Labor Supply over the Life-Cycle: Facts and Theory

This paper has three contributions. First, we document various facts about the labor supply decisions of men and women in the US over their life-cycle. For cohorts of male and female individuals in the PSID, we study the life-cycle profile of average hours worked, the variance of log hours, and the fraction of individuals with positive hours worked during the year. In addition, we analyze the persistence in labor force participation and hours worked over the life-cycle. Second, we build a model which is consistent with the facts, and explore the relationship between individual and aggregate labor supply. Third, we use the model to study the impact of various policies, such as a tax reform, on individual and aggregate labor supply.