Stone–Geary type preferences and the long-run labor supply

Tamotsu Nakamura ()
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Tamotsu Nakamura: Kobe University

Evolutionary and Institutional Economics Review, 2022, vol. 19, issue 1, No 8, 169-188

Abstract: Abstract In most advanced economies, working hours have steadily declined, while the per-capita income has steadily increased. Boppart and Krusell (J Polit Econ 128(1):118–157, 2020) propose a new preference class in order to account for these observations. They show that the income effect on labor supply exceeds the substitution effect in the balanced-growth path. However, the longer-term changes, or less-developed economies, reveal backward-bending relationships between income and working hours. To explain this fact, we introduce Stone–Geary type non-homotheticity in preferences into a non-overlapping generations model, and analyze how working hours evolve with income. With the non-homotheticity, the long-run equilibrium labor supply bends backward. Further, the backward-bending curve emerges not only as a transitional phenomenon, but also in the balanced-growth path.

Keywords: Stone–Geary type preference; Long-run labor supply; Backward-bending curve; Balanced growth; E21; J22; O33; O41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40844-021-00204-6

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