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Labor supply with stochastic wage rate and non-labor income uncertainty

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  • Jianli Wang
  • Pu Gong

Abstract

This paper deals with the labor supply problem in the contemporaneous presence of wage rate and non-labor income uncertainties. We examine the effect of a stochastic wage rate(a non-labor income uncertainty) on labor supply in the presence of a non-labor income uncertainty(a stochastic wage rate) and provide some conditions of utility function for assuring larger labor supply. We study the joint effect of two types of uncertainty on labor supply when two risks are either small or positive quadrant dependent. Our work extends the previous model of labor supply to two-risk framework and shows some new explorations on the classical issue of labor supply under uncertainty. Copyright Springer-Verlag 2013

Suggested Citation

  • Jianli Wang & Pu Gong, 2013. "Labor supply with stochastic wage rate and non-labor income uncertainty," Journal of Economics, Springer, vol. 109(1), pages 41-55, May.
    • Handle: RePEc:kap:jeczfn:v:109:y:2013:i:1:p:41-55
    DOI: 10.1007/s00712-012-0293-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Labor supply; Stochastic wage rate; Non-labor income uncertainty; Partial relative prudence measure; Cross-prudent; D81;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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