Estimating Labor Supply Elasticities in Korea: The Role of Limited Commitment Between Spouses

Abstract This paper examines if (i) the estimated labor supply elasticity is biased due to changes in the bargaining positions within a household in Korea and (ii) the problem, if detected, can be mitigated by using the distribution of different consumption bundles as a proxy (Bredemeier, Christian, Jan Gravert, and Falko Juessen. 2023. “Accounting for Limited Commitment Between Spouses when Estimating Labor-Supply Elasticities.” Review of Economic Dynamics 51: 547–78). Using KLIPS data from 2008 to 2022, we estimate the Frisch elasticity for married male workers to be around 0.44 and the bias is corrected mostly by controlling for total consumption, not by the distribution of consumption bundles. Similarly, estimates for married female workers did not exhibit significant bias. We suggest possible explanations on why our finding is different from the previous finding using US data.