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Slutsky Equation and Negative Elasticity of Labor Supply: Behavioral Bias or Optimal Consumption-Leisure Choice?

Listed author(s):
  • Sergey MALAKHOV

    (Pierre-Mendès-France University, France)

One of the applications of the prospect theory is the behavioral phenomenon of the negative elasticity of the individual labor supply. This paper argues that the negative elasticity of labor supply can be understood better with the help of the interpretation of the Slutsky equation with regard to the common consumption-leisure choice. The interpretation of the Slutsky equation corresponds to the empirical evidence that leisure is a net complement for an important part of consumption.

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Article provided by Sprint Investify in its journal Expert Journal of Economics.

Volume (Year): 2 (2014)
Issue (Month): 2 ()
Pages: 80-84

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Handle: RePEc:exp:econcs:v:2:y:2014:i:2:p:80-84
Contact details of provider: Web page: http://www.expertjournals.com/

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  1. Sergey MALAKHOV, 2014. "Slutsky Equation and Negative Elasticity of Labor Supply: Behavioral Bias or Optimal Consumption-Leisure Choice?," Expert Journal of Economics, Sprint Investify, vol. 2(2), pages 80-84.
  2. Sergey MALAKHOV, 2014. "Sunk Costs Of Consumer Search: Economic Rationality Of Satisficing Decision," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(1), pages 56-62, June.
  3. Vincent Barnett, 2006. "Chancing an interpretation: Slutsky's random cycles revisited," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(3), pages 411-432.
  4. Colin Camerer & Linda Babcock & George Loewenstein & Richard Thaler, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 407-441.
  5. Malakhov, Sergey, 2012. "Satisficing decision procedure and optimal consumption-leisure choice," MPRA Paper 38964, University Library of Munich, Germany.
  6. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 341-374.
  7. Rousslang, Donald J & Tokarick, Stephen P, 1995. "Estimating the Welfare Cost of Tariffs: The Roles of Leisure and Domestic Taxes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 83-97, January.
  8. John S. Chipman & Jean-Sébastien Lenfant, 2002. "Slutsky's 1915 Article: How It Came to Be Found and Interpreted," History of Political Economy, Duke University Press, vol. 34(3), pages 553-597, Fall.
  9. Sergey MALAKHOV, 2013. "Money Flexibility And Optimal Consumption-Leisure Choice Under Price Dispersion," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(1), pages 77-88, July.
  10. Cook, Philip J, 1972. "A 'One Line' Proof of the Slutsky Equation," American Economic Review, American Economic Association, vol. 62(1), pages 139-139, March.
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