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The theory of labour supply and commodity demand with an endogenous marginal wage rate

Published online by Cambridge University Press:  17 August 2016

Alan A. Powell
Alan A. Powell*
Affiliation:
University of Melbourne
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Extract

The seventies have seen a burgeoning of an empirical literature on labour-leisure choice grounded in the work on the systems approach to the estimation of demand systems which flowered in the sixties. Working with the Klein-Rubin utility function, Betancourt (1973) extended Lluch’s ELES system (1970, 1973) to include the labour-leisure choice. Abbott and Ashenfelter (1976) analysed United States data on hours worked using both the Klein-Rubin and the indirect addilog utility functions (although, unlike Betancourt, they did not endogenize savings). Kiefer (1977) used a Bayesian approach to the estimation of a 7 commodity plus leisure system which imposed only classical restrictions on a Rotterdam model written in logarithmic differentials. He also explored the use of a quadratic indirect utility function as a second order Taylor approximation to an arbitrary nested indirect utility function in which Box/Cox transformations comprise the inner nests (Kiefer, 1975). Phlips (1978) has used an extended Klein-Rubin utility function, in which the real stock of money appears, to integrate the demand for commodities and leisure with the demand for money. Barnett (1979) has imbedded the commodity and leisure demand problem into a version of the Rotterdam model under relatively weak assumptions about preferences. Finally, recent empirical work using Betancourt’s TELES model on Australian data has been reported by Tulpulé (1978).

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 45 , Issue 3 , September 1979 , pp. 215 - 239
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1979 

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Footnotes

*

I am grateful to my colleagues Ashok Tulpulé and Richard J. Filmer who worked with me on the paper which begat the current paper. Richard Filmer also drew my attention to some relevant literature which I had overlooked. I benefitted from the opportunities to present that earlier paper to a workshop at C.O.R.E., Louvain, in October 1978, and to present a draft of the current paper to the Institute of Labour Studies at the Flinders University of South Australia in September 1979. I am especially indebted to Peter B. Dixon, who checked the mathematics underlying the major results of the paper, and as well offered helpful comments. Tony Lawson and Ken Clements kindly gave detailed comments on the manuscript. The research was supported, in part, by the IMPACT Project. All errors are the exclusive responsibility of the author.

References

REFERENCES

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