The Anatomy of the Extensive Margin Labor Supply Response

We estimate how labor force participation among married women in Sweden responded to changing work incentives implied by a reform in the tax and transfer system in 1997. Using rich, population-wide, administrative data, we estimate an average participation elasticity of 0.13, thereby adding to the scarce literature estimating participation elasticities using quasi-experimental methods. We also highlight that estimated extensive margin responses necessarily are local to the observed equilibrium. Among low-income earners, elasticities are twice as large in the group with the lowest employment level, compared with the group with the highest employment level.