Measuring Welfare Changes With Nonlinear Budget Constraints in Continuous and Discrete Hours Labour Supply Models
AbstractThis paper examines the computation of exact welfare measures in the context of labour supply models. It is suggested that the standard method of computing compensating and equivalent variations does not allow sufficiently for the nonlinearity of the budget constraint. An exact method is suggested. The method is applied to contexts in which individuals are allowed to vary their hours continuously and where only a limited number of discrete hours of work are available. Discrete hours models have in recent years been used in view of the substantial econometric advantages when estimating the parameters of direct utility functions.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 799.
Length: 29 pages
Date of creation: 2001
Date of revision:
Note: This paper has now been published in: Creedy, J. and Kalb G. (2005) Measuring Welfare Changes in Labour Supply Models, Manchester School, 73, no.6, pp. 664-685.
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LABOUR ; BUDGET ; UTILITY FUNCTIONS;
Other versions of this item:
- John Creedy & Guyonne Kalb, 2001. "Measuring Welfare Changes With Nonlinear Budget Constraints in Continuous and Discrete Hours Labour Supply Models," Melbourne Institute Working Paper Series wp2001n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
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