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A Reinterpretation of the Traditional Income-Leisure Model, with Application to In Kind Subsidy Programs

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  • Michael P. Murray

Abstract

The traditional income-leisure model treats income as a composite commodity; it is not appropriate for studying commodity subsidies which alter relative prices within the composite. I suggest reinterpreting the traditional model as a special case of a utility function weakly separable with respect to leisure and all other commodities. This interpretation allows the work incentive effects of any subsidy program to be inferred from the terms of the program and data on the work effort effects of any other subside program, most notably income maintenance experiments. I illustrate our approach by estimating the work incentive effects of public housing. The model implies that even if special complementarities between leisure or work and the subsidized good are neglected, in kind transfers will have different work incentive effects than equivalent cash transfers. In practice, in kind transfers will generally stimulate work efforts vis-a-vis equivalent cash grants.

Suggested Citation

  • Michael P. Murray, 1978. "A Reinterpretation of the Traditional Income-Leisure Model, with Application to In Kind Subsidy Programs," Working Paper 307, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:307
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    Cited by:

    1. Sandra J. Newman, 2008. "Does housing matter for poor families? A critical summary of research and issues still to be resolved," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 895-925.
    2. Eoin Corrigan, 2019. "The Scale and Impact of the Local Authority Rent Subsidy," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 159-211.
    3. Federico Tagliati, 2019. "Child labor under cash and in-kind transfers: evidence from rural Mexico," Working Papers 1935, Banco de España.
    4. Alberto Pench, 2018. "Intra Generational Solidarity and Long Term Care: A Role for In Kind Transfers," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2018(1), pages 35-57.
    5. Chen, Jie, 2006. "The Dynamics of Housing Allowance Claims in Sweden: A discrete-time hazard analysis," Working Paper Series 2006:1, Uppsala University, Department of Economics.
    6. Newman, Sandra & Harkness, Joseph, 2000. "Assisted Housing and the Educational Attainment of Children," Journal of Housing Economics, Elsevier, vol. 9(1-2), pages 40-63, March.
    7. Borbely, Daniel, 2022. "The impact of housing subsidy cuts on the labour market outcomes of claimants: Evidence from England," Journal of Housing Economics, Elsevier, vol. 57(C).
    8. Isaac F. Megbolugbe, 1991. "Hedonic Indices and Housing Programme Benefits," Urban Studies, Urban Studies Journal Limited, vol. 28(5), pages 773-781, October.
    9. Luca Giangregorio, 2024. "Welfare type and income inequality: an income source decomposition including in-kind benefits and cash-transfers entitlement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 367-403, April.
    10. Mattos, Enlinson & Terra, Rafael, 2016. "Cash-cum-in-kind transfers and income tax function," Textos para discussão 414, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    11. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430, Elsevier.
    12. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    13. Murray, Michael P. & Sun, Guoqing, 2017. "The demand for space in China," Journal of Urban Economics, Elsevier, vol. 98(C), pages 214-222.
    14. Enlinson Mattos & Rafael Terra, 2016. "Nature of transfers, income tax function and empirical estimation of elasticity of taxable income for Brazil," Applied Economics, Taylor & Francis Journals, vol. 48(53), pages 5201-5220, November.
    15. Walter S. Misiolek & Harold W. Elder, 1987. "Cost-Effective Redistribution: Implications of a Basic Needs Approach to Public Assistance," Public Finance Review, , vol. 15(1), pages 76-97, January.
    16. Nisha Agrawal, 1988. "The Economic Effects of Public Housing in Australia," The Economic Record, The Economic Society of Australia, vol. 64(4), pages 254-267, December.
    17. Skoufias, Emmanuel & Gonzalez-Cossio, Teresa, 2008. "The Impacts of Cash and In-Kind Transfers on Consumption and Labor Supply: Experimental Evidence from Rural Mexico," Policy Research Working Paper Series 4778, The World Bank.
    18. B.L. DeBorger, 1985. "Benefits and Consumption Effects of Public Housing Programs in Belgium: Some Aggregate Results," Urban Studies, Urban Studies Journal Limited, vol. 22(5), pages 409-419, October.
    19. Fessler, Pirmin & Rehm, Miriam & Tockner, Lukas, 2014. "The impact of housing non-cash income on the unconditional distribution of household income in Austria," Working Paper Series 1718, European Central Bank.
    20. Shroder, Mark, 2002. "Does housing assistance perversely affect self-sufficiency? A review essay," Journal of Housing Economics, Elsevier, vol. 11(4), pages 381-417, December.
    21. Simon Feeny & Rachel Ong & Heath Spong & Gavin Wood, 2012. "The Impact of Housing Assistance on the Employment Outcomes of Labour Market Programme Participants in Australia," Urban Studies, Urban Studies Journal Limited, vol. 49(4), pages 821-844, March.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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