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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. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    5. John Creedy, 1996. "Fiscal Policy and Social Welfare," Books, Edward Elgar Publishing, number 797, December.
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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. Richard Barnett & Joydeep Bhattacharya & Helle Bunzel, 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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