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Labour Supply and Social Welfare when Utility Depends on a Threshold Consumption Level

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  • JOHN CREEDY

Abstract

This paper examines labour supply and social welfare, following Lewis and Ulph (1988>), in a model in which individuals gain a utility premium if they raise their net income up to or above a threshold level. It may thus be worthwhile for some individuals to avoid poverty by supplying a higher amount of labour than in the standard model. Over a range of wage rates, labour supply falls as the wage increases. In this framework, poverty is integral to a social welfare function because it matters to individuals. A special case leads to the use of the headcount poverty measure in an abbreviated social welfare function.

Suggested Citation

  • John Creedy, 1997. "Labour Supply and Social Welfare when Utility Depends on a Threshold Consumption Level," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 159-168, June.
    • Handle: RePEc:bla:ecorec:v:73:y:1997:i:221:p:159-168
    DOI: 10.1111/j.1475-4932.1997.tb00989.x
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    References listed on IDEAS

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    1. Creedy, John, 1997. "Evaluating Alternative Tax and Transfer Schemes with Endogenous Earnings," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 43-56, January.
    2. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
    3. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    4. John Creedy, 1996. "Fiscal Policy and Social Welfare," Books, Edward Elgar Publishing, number 797.
    5. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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    Cited by:

    1. John Creedy & Catherine Sleeman, 2004. "Adult Equivalence Scales, Inequality and Poverty in New Zealand," Treasury Working Paper Series 04/21, New Zealand Treasury.
    2. Pascual, Unai & Barbier, Edward B., 2005. "On- And Off-Farm Labor Decisions By Slash-And-Burn Farmers In Yucatan (Mexico)," Environmental Economy and Policy Research Discussion Papers 31926, University of Cambridge, Department of Land Economy.
    3. Barnett, Richard & Bhattacharya, Joydeep & Bunzel, Helle, 2016. "Do the Joneses make you financially vulnerable?," School of Economics Working Paper Series 2016-11, LeBow College of Business, Drexel University.

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