The relative income effect and labor supply

Robertas Zubrickas

Journal of Economic Behavior & Organization, 2023, vol. 209, issue C, 176-184

Abstract: In the presence of relative income concerns, labor supply response is predicted to be smaller for individual wage change than for global wage change. This difference arises from the relative income effect, which in the case of global wage change is offset by changes in income distribution. We relate the predicted difference in labor supply response to the controversy about differences in micro and macro labor supply elasticities. The relative income effect can also account for a variety of empirical patterns of labor supply elasticity that could not be previously addressed within a single framework.

JEL-codes: D91 E24 J22 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:209:y:2023:i:c:p:176-184

DOI: 10.1016/j.jebo.2023.02.025

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