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The macro-literature insists on a consumption-leisure elasticity of 0 to match the balanced growth fact of constant labor supply.

Is there any paper that tries to evaluate this elasticity using micro-data, for a representative subsample of the population? There are many papers that show that consumption-leisure elasticities are not 0 for most goods, but it can be argued that these studies only use a non-representative sample of the population, and that - with a larger sample - these elasticities are more likely to average out to zero.

What has been done in this respect?

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  • $\begingroup$ When you say "for a whole generation" do you examining over the life-cycle? That is, how rising income changes the consumption-leisure decision differently for agents of different ages? Or do you mean across all people of a certain age? I think you mean the latter, something like using a census of consumption and leisure (or at least a more representative sample) choices? $\endgroup$ – BKay Jan 7 '16 at 14:13
  • $\begingroup$ @BKay Indeed, the latter. $\endgroup$ – FooBar Jan 7 '16 at 14:20
  • $\begingroup$ Second question, While I'm sure many papers assume this, I'm not sure this is actually a general macroeconomic assumption. Can you document "insists"? I thought the stylized fact was that prime age workers have a near zero elasticity of hours with respect to income but that in wealthier economies people start work older and retire earlier, leading to a gently backward bending lifetime labor supply curve with respect to lifetime income. I thought non-representative agent models with tax and labor complexities allow for labor supply (and therefore cons.) to respond to lifetime wages. $\endgroup$ – BKay Jan 7 '16 at 14:22

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