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Unemployment and Wage Rigidity when Labor Supply is a Household Decision

  • Basu, K.
  • Genicot, G.
  • Stiglitz, J.

The present paper formally models household labor supply decisions and establishes sufficient conditions established, such as the possibility of multiple equilibria in the labor market and how the announcement of a minimum wage policy can result in an overall lowering of wages and also give rise to an equilibirum which display, simultaneously, excess demand and excess supply of labor.

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Paper provided by California Irvine - School of Social Sciences in its series Papers with number 00-01-11.

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Length: 48 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:calirv:00-01-11
Contact details of provider: Postal: UNIVERSITY OF CALIFORNIA IRVINE, SCHOOL OF SOCIAL SCIENCES, IRVINECALIFORNIA 91717 U.S.A.

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  1. Layard, R & Barton, M & Zabalza, A, 1980. "Married Women's Participation and Hours," Economica, London School of Economics and Political Science, vol. 47(185), pages 51-72, February.
  2. Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
  3. Stiglitz, Joseph E, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC'S: The Labor Turnover Model," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 194-227, May.
  4. Orley Ashenfelter, 1977. "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply," Working Papers 484, Princeton University, Department of Economics, Industrial Relations Section..
  5. Fleisher, Belton M & Rhodes, George, 1976. "Unemployment and the Labor Force Participation of Married Men and Women: A Simultaneous Model," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 398-406, November.
  6. Basu, Kaushik, 1999. "The intriguing relation between adult minimum wage and child labor," Policy Research Working Paper Series 2173, The World Bank.
  7. Tim Maloney, 1987. "Employment Constraints and the Labor Supply of Married Women: A Reexamination of the Added Worker Effect," Journal of Human Resources, University of Wisconsin Press, vol. 22(1), pages 51-61.
  8. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  9. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September.
  10. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  11. Maloney, Tim, 1991. "Unobserved Variables and the Elusive Added Worker Effect," Economica, London School of Economics and Political Science, vol. 58(230), pages 173-87, May.
  12. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  13. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  14. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
  15. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
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