Labor Supply and Optimization Frictions: Evidence from the Danish student labor market

Jakob Egholt Søgaard

Labor Supply and Optimization Frictions: Evidence from the Danish student labor market

Department of Economics

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Abstract

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.

Translated title of the contribution	Arbejdsudbud og optimiseringsfriktioner: Empiri fra det danske studenterarbejdsmarked
Original language	English
Publisher	Economic Policy Research Unit. Department of Economics, University of Copenhagen
ISBN (Electronic)	0908‐7745
Publication status	Published - Dec 2014

Series	EPRU Working Paper Series
ISSN	0908-7745

Keywords

Faculty of Social Sciences

Access to Document

Labour Supply and Optimization Friction

http://web.econ.ku.dk/eprn_epru/Workings_Papers/WP-2014-02.pdf

Cite this

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