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sloping labor supply curve.
Because the income effect could
even more than offset
the substitution effect.
But, in reality, given the way
I set up the example, you'd
think men would basically
have a pretty
inelastic labor supply.
You'd think, 40 years ago, these
things would basically
both be 0, both offset.
And, basically, you'd have a
situation where the change in
the wages didn't matter
much for men.
And, in fact, that's
what people found.
This is a wonderful case of the
convergence of truth with
theory and a wonderful chance
to see the power of some
pretty simplistic theory.
The intuition is exactly borne
out in the data, which is
males, 40 years ago,
would have a very
inelastic labor supply.
Their labor supply curves were
virtually vertical and maybe
backward-bending.
There's some controversy
on that.
Some estimates got
backward-bending.
Some didn't.
But there were certainly
not upward sloping.
It was basically vertical.
Women had a very few elastic
labor supply.
The elasticity is estimated
to be around 1.
That is every 1% change
in the wage lead to
1% more labor supply.
So that's a fairly elastic
labor supply for women.
Where, for men, the estimate
was basically 0.
And that's kind of neat, because
we're actually getting
confirmation in the data
of what the theory
would have told us.
Now, someone else tell me what
do you think has happened over
the last 40 years relative to
these elasticities of married
men and married women.
Yeah.
AUDIENCE: The elasticity of
married women has gone down in