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Family Labor Supply in Urban China

In this paper, we analyze family labor supply in urban China using discretized neo-classical labor supply model, where we take into account the unobserved heterogeneity of each spouse and their correlation, unobservability and measurement errors of the wage rates, and the correlation of the wage and preferences. The correlation of preference between spouses is also taken into account. Elasticities of labor supply are calculated. We also simulate the effect of tax policy on the labor supply. The elasticities are found to be quite small, but the signs are in accordance with the general findings for other countries in the literature. JEL CODES: J22, H31, C14, R23