Labour Supply and Social Welfare When Utility Depends on a Threshold Consumption Level
This paper examines labor supply and social welfare, following G. W. Lewis and D. T. 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 labor than in the standard model. Over a range of wage rates, labor 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. Copyright 1997 by The Economic Society of Australia.
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Volume (Year): 73 (1997)
Issue (Month): 221 (June)
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