Estimating Frisch labor supply elasticity in Mongolia

Abstract

Using data from the Household Socio-Economic Survey (HSES) conducted in
2018 aggregated by prefecture, age group, and sex, we estimate the Frisch labor
supply elasticity which has been seldom estimated in Mongolia. The change in labor supply can be decomposed into two labor-supply behaviors: extensive margin,
indicating workers’ entry and exit from the labor market; and intensive margin,
indicating changes in hours of work in response to a wage change. Our estimate of
the Frisch elasticity on the extensive and intensive margins combined is 0.68 and
the Frisch elasticity on only the intensive margin is 0.09. These results suggest that
extensive margin explains the bulk of labor-supply changes in Mongolia.