Modeling Labor Supply through Duality and the Slutsky Equation

Ivan Ivanov and Julia Dobreva
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Ivan Ivanov: Department of Statistics and Econometrics, Faculty of Economics and Business Administration, Sofia University, Bulgaria
Julia Dobreva: Department of Economics, Faculty of Economics and Business Administration, Sofia University, Bulgaria

International Journal of Business and Economic Sciences Applied Research (IJBESAR), 2010, vol. 3, issue 2, 111-122

Abstract: In the present paper an analysis of the neo-classical optimization model with linear constraints is proposed. By introducing the dual problem it is shown that the solution to the maximization problem is also a solution to the minimization problem. The purely theoretical model proposes a universal equation, similar to the Slutsky equation as derived in the consumption theory. Another application is needed, different from the standard applications of the model found in economic literature. This application is based on the study of the change in optimality caused by the taxes on labor. The application focuses on how they impact the optimal decision in the choice between leisure and labor through the application of the classification derived on the basis of the Slutsky equation.

Keywords: labor optimization; duality; the Slutsky equation; tax rates (search for similar items in EconPapers)
JEL-codes: C61 C62 D11 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tei:journl:v:3:y:2010:i:2:p:111-122

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