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A backward-bending and forward-falling semi-log model of labour supply

Listed author(s):
  • Panos Pashardes
  • Alexandros Polycarpou

This paper proposes a labour supply function that allows not only for backward-bending behaviour at high but also for forward-falling behaviour at low wage rates. The proposed model adheres to the fundamentals of consumer theory and encompasses all well-known and widely used semi-log labour supply models in the literature. It is applied to UK data to investigate female labour supply and, in particular, to demonstrate the importance of including a forward-falling segment in the empirical specification for accurate estimation of labour supply behaviour at the low end of the wage distribution. The policy implications of our empirical findings are considered in the context of a hypothesised minimum wage reform.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-15.pdf
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Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 03-2015.

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Length: 29 pages
Date of creation: Feb 2015
Handle: RePEc:ucy:cypeua:03-2015
Contact details of provider: Web page: http://www.ucy.ac.cy/econ/en

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  8. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-1085, December.
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  10. Gronau, Reuben, 1974. "Wage Comparisons-A Selectivity Bias," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1119-1143, Nov.-Dec..
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  20. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
  21. Blomquist, Sören & Newey, Whitney, 1997. "Nonparametric Estimation of Labor Supply Functions Generated by Piece Wise Linear Budget Constraints," Working Paper Series 1997:24, Uppsala University, Department of Economics.
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  25. Moffitt, Robert, 1990. "The Econometrics of Kinked Budget Constraints," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 119-139, Spring.
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  27. Heckman, James J, 1974. "Life Cycle Consumption and Labor Supply: An Explanation of the Relationship Between Income and Consumption Over the Life Cycle," American Economic Review, American Economic Association, vol. 64(1), pages 188-194, March.
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