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

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  • Panos Pashardes
  • Alexandros Polycarpou

Abstract

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.

Suggested Citation

  • Panos Pashardes & Alexandros Polycarpou, 2015. "A backward-bending and forward-falling semi-log model of labour supply," University of Cyprus Working Papers in Economics 03-2015, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:03-2015
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    File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-15.pdf
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    References listed on IDEAS

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    Keywords

    female labour supply; low-wage work behaviour; s-shaped labour supply; minimum wage reform.;

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