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- Jakob Egholt Søgaard (2014): Labor Supply and Optimization Frictions: Evidence from the Danish student labor market
In this paper I investigate the nature of optimization frictions by studying the labor market of Danish students. This particular labor market is an interesting case study as it features a range of special institutional settings that affect students’ incentive to earn income and comparing outcomes across these setting effectively allow you to distinguish between different types of frictions. I find that the considered labor market is significantly affected by optimizations frictions, which masks the bunching at kink points normally associated with a positive labor supply elasticity under standard theory. More concretely I find the dominate optimization friction to be individuals’ inattention about their earnings during the year, while real adjustment cost and gradual learning appears to be of less importance.
RePEc:kud:epruwp:14-02 Save to MyIDEAS - Jakob Egholt S�gaard (2019): Labor Supply and Optimization Frictions: Evidence from the Danish Student Labor Market
Using Danish administrative data, I investigate the magnitude and nature of optimization frictions in the labor market of Danish students. Danish students face a unique institutional setting that makes it possible to distinguish between different types of frictions and estimate their effect on individual utility. I find that frictions significantly affect observed labor market outcomes. In particular, the empirical evidence points to inattention as the dominant type of friction. ... Overall, optimization frictions reduce the utility of individuals by approximately 2-3 percent of disposable income.
RePEc:kud:kucebi:1901 Save to MyIDEAS - Søgaard, Jakob Egholt (2019): Labor supply and optimization frictions: Evidence from the Danish student labor market
Using Danish administrative data, I investigate the magnitude and nature of optimization frictions in the labor market of Danish students. Danish students face a unique institutional setting that makes it possible to distinguish between different types of frictions and estimate their effect on individual utility. I find that frictions significantly affect observed labor market outcomes. In particular, the empirical evidence points to inattention as the dominant type of friction. ... Overall, optimization frictions reduce the utility of individuals by approximately 2–3% of disposable income.
RePEc:eee:pubeco:v:173:y:2019:i:c:p:125-138 Save to MyIDEAS - Vesal, Mohammad (2014): Optimization Frictions in the Choice of UK Flat Rate Scheme of VAT
These patterns favor broadly defined information frictions as potential hurdles for joining FRS.
RePEc:pra:mprapa:101017 Save to MyIDEAS - Chetty, Nadarajan (2012): Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply
How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum. The bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities. ... As a result, small frictions can explain the differences between micro and macro elasticities, extensive and intensive margin elasticities, and other disparate findings.
RePEc:hrv:faseco:9748524 Save to MyIDEAS - Raj Chetty (2012): Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply
How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum. The bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities. ... As a result, small frictions can explain the differences between micro and macro elasticities, extensive and intensive margin elasticities, and other disparate findings.
RePEc:ecm:emetrp:v:80:y:2012:i:3:p:969-1018 Save to MyIDEAS - Raj Chetty (2009): Bounds on Elasticities with Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply
How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum. The bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities. ... As a result, small frictions can explain the differences between micro and macro elasticities, extensive and intensive margin elasticities, and other disparate findings.
RePEc:nbr:nberwo:15616 Save to MyIDEAS - Lu, Yi & Shi, Julie & Yang, Wanyu (2019): Expenditure response to health insurance policies: Evidence from kinks in rural China
A static response model with optimization frictions estimates that a complete elimination of the reimbursement would cause the total expenditure per visit to decrease by 34.5%, and approximately one-third of the studied population makes decisions with errors. Heterogeneous expenditure responses and optimization frictions are observed across demographic groups.
RePEc:eee:pubeco:v:178:y:2019:i:c:s0047272719301100 Save to MyIDEAS - Henrik J. Kleven & Mazhar Waseem (2013): Using Notches to Uncover Optimization Frictions and Structural Elasticities: Theory and Evidence from Pakistan
We develop a framework for nonparametrically identifying optimization frictions and structural elasticities using notches--discontinuities in the choice sets of agents--introduced by tax and transfer policies. ... By combining excess bunching (observed response attenuated by frictions) with missing mass in the dominated region (frictions), it is possible to uncover the structural elasticity that would govern behavior in the absence of frictions and arguably capture long-run behavior. ... While observed bunching is large and sharp, optimization frictions are also very large as the majority of taxpayers in dominated ranges are unresponsive to tax incentives. The combination of large observed bunching and large frictions implies that the frictionless behavioral response to notches is extremely large, but the underlying structural elasticity driving this response is nevertheless modest.
RePEc:oup:qjecon:v:128:y:2013:i:2:p:669-723 Save to MyIDEAS - Bastani, Spencer & Selin, Håkan (2011): Bunching and Non-Bunching at Kink Points of the Swedish Tax schedule
This holds true even in the presence of optimization frictions if the jump in marginal tax rates is suciently large. ... If wage earners on average tolerate 1% of their disposable income in optimization costs, the upper bound on the taxable income elasticity is 0.39.
RePEc:hhs:uufswp:2011_012 Save to MyIDEAS