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Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumption-leisure choice?

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  • Malakhov, Sergey

Abstract

One of the applications of the prospect theory is the behavioral phenomenon of the negative elasticity of the individual labor supply. This working 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.

Suggested Citation

  • Malakhov, Sergey, 2014. "Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumption-leisure choice?," MPRA Paper 53871, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53871
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 341-374.
    4. Sergey Malakhov, 2014. "Satisficing Decision Procedure and Optimal Consumption-Leisure Choice," International Journal of Social Science Research, Macrothink Institute, vol. 2(2), pages 138-151, September.
    5. Malakhov, Sergey, 2014. "Sunk costs of consumer search: economic rationality of satisficing decision," MPRA Paper 53493, University Library of Munich, Germany.
    6. 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.
    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. 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.
    9. Malakhov, Sergey, 2013. "Money flexibility and optimal consumption-leisure choice under price dispersion," MPRA Paper 45197, University Library of Munich, Germany.
    10. John S. Chipman & Jean-S├ębastien 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.
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    Cited by:

    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.

    More about this item

    Keywords

    Slutsky equation; prospect theory; labor supply; consumption-leisure choice;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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