Reservation Raises: The Aggregate Labour Supply Curve at the Extensive Margin.

This article focuses on measuring the desired extensive-margin labor supply—the fraction of individuals willing to work at given wage levels—using the concept of reservation raises, defined as the percent wage change that makes an individual indifferent between employment and nonemployment. Drawing on two representative surveys from the U.S. (NORC AmeriSpeak) and Germany (German Socio-Economic Panel), the study constructs nonparametric aggregate labor supply curves as the cumulative distribution functions of reservation raises. The findings reveal large local elasticities (above 3) around the prevailing wage, consistent with business cycle fluctuations, but substantially smaller arc elasticities (around 0.5) for large upward wage shifts, reflecting asymmetries in labor supply responses. The empirical curves differ markedly from those generated by existing macroeconomic models, which fail to capture the observed nonconstant and asymmetric shape, highlighting the need for models that better incorporate heterogeneous and dynamic labor supply preferences.