New estimates of intertemporal substitution. The effect of corner solutions for year-round workers

This paper estimates the intertemporal elasticity of substitution for married males taking into account that many individuals are at a corner solution for weeks worked by virtue of working year round. The fact that these individuals do not choose to engage in much intertemporal substitution may simply indicate that the corner solution inhibits their ability to do so, rather than indicating a low desire to intertemporally substitute. Our estimates are able to distinguish between these two cases, with the results showing much higher intertemporal elasticities of substitution than reported in earlier studies.