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A backward-bending labor supply curve without an income effect

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  • Chung-cheng Lin

Abstract

This paper proposes an explanation of the backward-bending labor supply curve that is not based on the premise that the income effect dominates the substitution effect. Unlike the classical labor supply theory that treats working hours and work effort as being synonymous, this paper treats them as distinct variables in an efficiency wage model. A wage rate increase is shown to give rise to two direct substitution effects that motivate the worker to provide more effort and hours. When a greater effort exerts a cross substitution effect that reduces hours, the hour supply curve may bend backward in the absence of an income effect. Copyright 2003, Oxford University Press.

Suggested Citation

  • Chung-cheng Lin, 2003. "A backward-bending labor supply curve without an income effect," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 336-343, April.
  • Handle: RePEc:oup:oxecpp:v:55:y:2003:i:2:p:336-343
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    Cited by:

    1. Marika Karanassou & Hector Sala & Dennis J. Snower, 2008. "The Evolution Of Inflation And Unemployment: Explaining The Roaring Nineties," Australian Economic Papers, Wiley Blackwell, vol. 47(4), pages 334-354, December.
    2. Dan Usher, 2013. "Two Sources of Bias in Estimating the Peak of the Laffer Curve," Working Papers 1320, Queen's University, Department of Economics.
    3. Malakhov, Sergey, 2018. "Propensity to search and income elasticity of demand: does the equilibrium really exist?," MPRA Paper 86250, University Library of Munich, Germany.
    4. Figueroa, Eugenio & Pastén, Roberto, 2015. "Beyond additive preferences: Economic behavior and the income pollution path," Resource and Energy Economics, Elsevier, vol. 41(C), pages 91-102.
    5. Dan Usher, 2014. "How High Might the Revenue-maximizing Tax Rate Be?," Working Papers 1334, Queen's University, Department of Economics.

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