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A reinterpretation of the traditional income-leisure model, with application to in-kind subsidy programs

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  • Murray, Michael P.

Abstract

The traditional income-leisure model treats income as a composite commodity; it is not appropriate for studying commodity subsidies which alter relative prices within the composite. I suggest reinterpreting the traditional model as a special case of a utility function weakly separable with respect to leisure and all other commodities. This interpretation allows the work incentive effects of any subsidy program to be inferred from the terms of the program and data on the work effort effects of any other subside program, most notably income maintenance experiments. I illustrate our approach by estimating the work incentive effects of public housing. The model implies that even if special complementarities between leisure or work and the subsidized good are neglected, in kind transfers will have different work incentive effects than equivalent cash transfers. In practice, in kind transfers will generally stimulate work efforts vis-a-vis equivalent cash grants.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 14 (1980)
Issue (Month): 1 (August)
Pages: 69-81

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Handle: RePEc:eee:pubeco:v:14:y:1980:i:1:p:69-81

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Web page: http://www.elsevier.com/locate/inca/505578

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Cited by:
  1. Jie Chen, 2006. "The Dynamics of Housing Allowance Claims in Sweden: A Discrete Time-Hazard Analysis," European Journal of Housing Policy, Taylor and Francis Journals, vol. 6(1), pages 1-29, April.
  2. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430 Elsevier.
  3. Janet Currie & Firouz Gahvari, 2007. "Transfers in Cash and In Kind: Theory Meets the Data," NBER Working Papers 13557, National Bureau of Economic Research, Inc.
  4. Sandra J. Newman, 2008. "Does housing matter for poor families? A critical summary of research and issues still to be resolved," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 895-925.
  5. Skoufias, Emmanuel & Gonzalez-Cossio, Teresa, 2008. "The Impacts of Cash and In-Kind Transfers on Consumption and Labor Supply: Experimental Evidence from Rural Mexico," Policy Research Working Paper Series 4778, The World Bank.

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