Frisch elasticity of labor supply
The Frisch elasticity of labor supply captures the elasticity of hours worked to the wage rate, given a constant marginal utility of wealth. Marginal utility is constant for risk-neutral individuals according to microeconomics. In other words, the Frisch elasticity measures the substitution effect of a change in the wage rate on labor supply.[1] This concept was proposed by the economist Ragnar Frisch after whom the elasticity of labor supply is named.
Let's denote the Frisch elasticity as FE. Then F E = d l n ( h t ) d l n ( w t ) | λ t = c o n s t {\displaystyle FE={\frac {dln({h_{t}})}{dln({w_{t}})}}{\Biggl |}_{\lambda _{t}=const}}.[4]
This is formula for overall Frisch elasticity, where h and w denote hours of work and wage, respectively.
Elasticity of hours worked to the wage rate.