Estimating the Welfare Cost of Labor Supply Frictions
How much worse-off are people because they can't work their preferred number of hours? In this paper, we estimate that Americans would be willing to pay at least 7% of their income on-average to be able to work as less/more than what they are able to. This estimate is much larger than previously believed because it accounts for all frictions that prevent people from working as much as they want.
Dec 22, 2025
