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Modeling Labor Supply through Duality and the Slutsky Equation

Author

Listed:
  • Ivan Ivanov

    (Department of Statistics and Econometrics, Faculty of Economics and Business Administration, Sofia University, Bulgaria)

  • Julia Dobreva

    (Department of Economics, Faculty of Economics and Business Administration, Sofia University, Bulgaria)

Abstract

In the present paper an analysis of the neo-classical optimization model with linear constraints is proposed. By introducing the dual problem it is shown that the solution to the maximization problem is also a solution to the minimization problem. The purely theoretical model proposes a universal equation, similar to the Slutsky equation as derived in the consumption theory. Another application is needed, different from the standard applications of the model found in economic literature. This application is based on the study of the change in optimality caused by the taxes on labor. The application focuses on how they impact the optimal decision in the choice between leisure and labor through the application of the classification derived on the basis of the Slutsky equation.

Suggested Citation

  • Ivan Ivanov & Julia Dobreva, 2010. "Modeling Labor Supply through Duality and the Slutsky Equation," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 3(2), pages 111-122, December.
  • Handle: RePEc:tei:journl:v:3:y:2010:i:2:p:111-122
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    File URL: http://ijbesar.teiemt.gr/docs/volume3_issue2/slutsky.pdf
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    File URL: http://ijbesar.teiemt.gr/volume3_issue2.php
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    Citations

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    Cited by:

    1. Darong Dai, 2013. "Independence and Uniqueness of the Mixed-Strategy Equilibrium in Social Networks," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 6(3), pages 79-96, December.

    More about this item

    Keywords

    labor optimization; duality; the Slutsky equation; tax rates;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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