TL;DR: Extensive margin and intensive margin are both abstract concepts that lack universally agreed upon definitions. However, extensive margin usually means something like “the total number of people who work” and intensive margin usually means something like “how many hours people work, on average”.

“Labor supply” of a country is an abstract concept, and there are many different ways we could try to measure it:

• Total number of workers
• Average number of hours worked, per worker
• Average efficiency of each worker (e.g. a worker who builds 1 desk every 60 minutes could be said to provide 33% more labor than another worker who builds the same desk using the same tools in 90 minutes)

Economists typically ignore the last option since it is difficult to measure worker output for many jobs and even more difficult to measure whether differences in worker output are due to differences in worker capability or differences in the tools available to workers. Consequently, economists usually account for such differences in a separate variable called “efficiency” and use the following standard definition for labor supply:

Labor supply is the total number of person-hours offered for hire during a given time period.

That’s a useful definition that is easier to measure, but it doesn’t tell us much about the causes of labor supply changes. For example, is the labor supply rising because people are working more hours or is the labor supply rising simply because the population of a country is growing?

To distinguish those two situations, economists defined the concepts of “extensive margin” and “intensive margin” of labor supply. Like labor supply, these are both abstract concepts that are ascribed different definitions by different economists.

Commonly though, extensive margin is defined as the total number of people available to work, and intensive margin is defined as the average number of hours that each of those people worked during a given period of time.

Alternative Definitions

In a paper comparing the labor supplies of the U.S., the UK, and France, the authors define the extensive margin of labor supply as the fraction E(X,T) of a reference period T during which individual X is employed or self-employed. The extensive margin of a population with N individuals is then just the average of the extensive margins of the individuals (as shown in the formulas below).

The authors then go on to define the intensive margin of labor supply as the ratio I(X,T) of the total number of hours worked by individual X during reference period T, to the extensive margin of that individual.

More Definitions

In an IRS study of independent contractor (IC) hiring, the authors define extensive margin IC usage as a number between 0 and 1 which represents the fraction of companies that hired at least one IC in a given tax year. The authors also define two different versions of intensive margin IC usage. Both definitions are continuous ratios which compare a company’s reliance on ICs relative to employees in a given tax year.

The first definition of intensive margin IC usage is the “Worker Ratio” defined as the ratio of ICs to the total number of workers (ICs and employees).

The second definition of intensive margin IC usage is the “Compensation Ratio” defined as the ratio of IC compensation (from 1099s) to aggregate worker compensation (the sum of compensation to ICs and employees).