Nonparametric structural estimation of labor supply in the presence of censoring

This paper extends the nonparametric structural method to estimate labor supply developed by Blomquist and Newey (2002) to handle cases in which there are individuals who do not work. The method is then applied to married women in Sweden from 1973 to 1999. I find an uncompensated wage elasticity of 0.98 and an income elasticity of -0.10, with the participation margin accounting for one third of the wage elasticity and two thirds of the income elasticity. The elasticities vary, however, a lot over time due to differences in tax systems and demographics. I also find results consistent with tax rates being around the net government revenue maximizing rates.

► I develop a nonparametric structural labor supply model that accounts for censoring. ► I estimate the labor supply of married women in Sweden from 1973 to 1999. ► I find an uncompensated wage elasticity of 0.98 and an income elasticity of 0.10.