narrower discretization with 13 choices, from 0 to 60 hoursweek with a step of fi ve hours, and 13 × 13 = 169 combinations for couples, is more computationally demand-
ing. However, it may pick up more country- specifi c peaks in hour distributions and, in fact, makes it closer to a continuous model. Interestingly, Table A13 shows that results
are very similar in all three cases J = 4,7, and 13, with only slightly larger elasticities observed in the four- point case for some countries for example, Belgium and Ireland.
Finally, we check whether elasticities are sensitive to the functional form. Similar to van Soest, Das, and Gong 2002 for the Netherlands, we experiment alternative
specifi cations by increasing the order of the polynomial in the utility function: qua- dratic baseline then cubic and quartic Rows 6 and 7 of the panels in Table A13.
We also change the way fl exibility is gained in the model by replacing fi xed costs of work, as used in Blundell et al. 2000, using part- time dummies last rows in Table
A13. Precisely, we include dummies at the 10, 20, and 30 hour choices in the 7- choice model, as used in van Soest 1995. These parameters may be interpreted as job search
costs for less common working hours, therefore including some of the labor market restrictions on the choice set.
28
Results for these different specifi cations are relatively stable: The size of elasticities hardly changes across the different modeling choices.
29
This result reinforces our main conclusions regarding international comparisons.
IV. Assessing Cross- Country Differences in Elasticity Size
The evidence presented above suggests that cross- country differences in elasticities remain, even after controlling for methodological differences. Accord-
ingly, we attempt to isolate important factors explaining these differences in this sec- tion. We still focus on married women, mainly because this group shows the largest
variation in elasticities across countries.
A. Wage and Labor Supply Levels
Hour and participation elasticities are strongly correlated with mean hours and partici- pation levels across countries. Here, we check that larger elasticities in countries such
as Greece, Ireland, and Spain are not simply due to the hour and wage levels. De- note
ε
c
= ∂ H
c
∂w
c
w
c
H
c
the hour elasticity for country c. We recompute elasticities as
ε
c M
= ∂ H
c
∂w
c
w H , using the country- specifi c responsiveness
28. The fact that some choices may not be available to some people due to institutional constraints or individ- ualjob characteristics can be modeled explicitly as a probability of choice availability in the log-likelihood.
See Aaberge, Dagsvik, and Strom 1995, who also allow for different wage rates at each choice. Such a model represents a different parameterization of the present one, where dummies for specifi c, possibly
constrained hours of work are used van Soest 1995. As for hour restrictions, see the discussion in the concluding section.
29. The only exception seems to be Italy, where higher-order polynomial utility leads to larger elasticities. The difference with the baseline is only statistically signifi cant in the case of participation elasticities, and
partly disappears when we restrict the condition of participation to people working at least fi ve hours a week when calculating elasticities. Indeed, there are a number of initial nonworking women for whom the
predicted number of weekly hours is very small after the wage increase used to calculate elasticities; the ad- ditional restriction is reasonable if we consider that it is unusual to observe such small values.
∂H
c
∂w
c
while holding hour and wage at the mean levels H
and w
for all countries adjusted for PPP differences in the case of wages. We focus on own- wage elasticities
of total hours, reporting the results in Figure 8. The upper left panel compares elas- ticities in the baseline circles and in this “mean levels” scenario triangles together
with their 95 percent bootstrapped confi dence intervals. The two scenarios are plotted one against the other in the upper right panel. We observe little difference when hold-
ing wages and hours constant, with the only exceptions being Estonia, Hungary, and Portugal the United States, which are pushed in the high low elasticity group under
the mean level scenario. This is clearly due to the NMS and Portugal the United States having signifi cant lower higher wage rates while their female participation
rates are somewhat close to the international average. The lower left right panel represents the “mean hour” “mean wage” scenario, where only hours wages hold
at the international mean value H w. We see that high- elasticity countries like Greece and Spain are not only characterized by lower female labor supply but also by lower
wage rates. However, these two effects cancel each other; consequently, these coun- tries remain in the high- elasticity group under the total mean level scenario. The main
message of this exercise is that cross- country differences are preserved when elastici- ties are evaluated at mean values, and must therefore be explained by other factors.
30
B. Tax- benefi t Systems
