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

Listed author(s):
  • Malakhov, Sergey

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.

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File URL: https://mpra.ub.uni-muenchen.de/55751/1/MPRA_paper_55751.pdf
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File URL: https://mpra.ub.uni-muenchen.de/57700/1/MPRA_paper_57700.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53871.

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Date of creation: 21 Feb 2014
Handle: RePEc:pra:mprapa:53871
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  1. Camerer, Colin & Babcock, Linda & Loewenstein, George & Thaler, Richard, 1996. "Labor Supply of New York City Cab Drivers: One Day At A time," Working Papers 960, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Malakhov, Sergey, 2013. "Money flexibility and optimal consumption-leisure choice under price dispersion," MPRA Paper 45197, University Library of Munich, Germany.
  3. 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.
  4. Malakhov, Sergey, 2012. "Satisficing decision procedure and optimal consumption-leisure choice," MPRA Paper 38964, University Library of Munich, Germany.
  5. 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.
  6. 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.
  7. John S. Chipman & Jean-Sébastien 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.
  8. 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.
  9. Malakhov, Sergey, 2014. "Sunk costs of consumer search: economic rationality of satisficing decision," MPRA Paper 53493, University Library of Munich, Germany.
  10. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 341-374.
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