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


  • Murray, Michael P.


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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  • Murray, Michael P., 1980. "A reinterpretation of the traditional income-leisure model, with application to in-kind subsidy programs," Journal of Public Economics, Elsevier, vol. 14(1), pages 69-81, August.
  • Handle: RePEc:eee:pubeco:v:14:y:1980:i:1:p:69-81

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    References listed on IDEAS

    1. Campbell, Colin D & Campbell, Rosemary G, 1976. "Conflicting Views on the Effect of Old-Age and Survivors Insurance on Retirement," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 369-388, September.
    2. Weiss, Yoram, 1972. "On the Optimal Lifetime Pattern of Labour Supply," Economic Journal, Royal Economic Society, vol. 82(328), pages 1293-1315, December.
    3. Boskin, Michael J. & Hurd, Michael D., 1978. "The effect of social security on early retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 361-377, December.
    4. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    5. Burkhauser, Richard V & Turner, John A, 1978. "A Time-Series Analysis on Social Security and Its Effect on the Market Work of Men at Younger Ages," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 701-715, August.
    6. Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1980. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
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    Cited by:

    1. 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.
    2. 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.
    3. Murray, Michael P. & Sun, Guoqing, 2017. "The demand for space in China," Journal of Urban Economics, Elsevier, vol. 98(C), pages 214-222.
    4. 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.
    5. Fessler, Pirmin & Rehm, Miriam & Tockner, Lukas, 2014. "The impact of housing non-cash income on the unconditional distribution of household income in Austria," Working Paper Series 1718, European Central Bank.
    6. 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.
    7. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    8. Shroder, Mark, 2002. "Does housing assistance perversely affect self-sufficiency? A review essay," Journal of Housing Economics, Elsevier, vol. 11(4), pages 381-417, December.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables


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