Using a general labor supply model in which individuals choose how much to work conditional on productivities and preferences for consumption relative to leisure, we show that the mapping from earnings and hours worked to productivities and preferences can be expressed entirely in terms of reduced-form labor supply elasticities. We investigate the roles that productivities and preferences play in driving income inequality in the United States. Benchmark labor supply elasticity estimates from the literature imply that productivities drive most income inequality. Preferences become increasingly important relative to benchmark, with larger income effects or larger differences between earnings and hours-worked elasticities.
Bergstrom, Katy, and William Dodds.
"Using Labor Supply Elasticities to Learn about Income Inequality: The Role of Productivities versus Preferences."
American Economic Journal: Economic Policy,
Personal Income, Wealth, and Their Distributions
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Fiscal Policies and Behavior of Economic Agents: Household
Time Allocation and Labor Supply
Human Capital; Skills; Occupational Choice; Labor Productivity
Wage Level and Structure; Wage Differentials