A structural analysis of labour supply elasticities in the Netherlands

Abstract

We estimate the labour supply elasticity for a large number of groups on the Dutch labour market. We exploit a large administrative household panel data set for the period 1999-2005. The idencation of the parameters benets from the large 2001 Dutch tax reform that led to substantial exogenous variation in household budget constraints. For couples we nd that men have much smaller elasticities than women, in particular when children are present. Furthermore, cross elasticities of men’s wages on women’s labour supply in couples are non-negligible. When they are single, men and women have similar labour supply elasticities. The elasticity is relatively high for single parents with small children, but much lower for single parents with children in secondary school. Low skilled singles and single parents have much higher labour supply elasticities than their high skilled counterparts. Dierences by skill are less pronounced for couples. For all groups, the decision whether to participate or not is much more responsive to nancial incentives than the hours per week decision.