Endogenous Labor Supply, Rigid Factor Prices And A Second Best Solution

Harvey Lapan

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The conventional wisdom asserts that distortions due to factor price rigidities should be eliminated by subsidies. However, we argue that the success of this policy rests upon the fact that the return to the factor is a pure rent. If factor supply is endogenous, then subsidies to employers and taxes on factor owners are needed to support the optimal solution. Since we believe this policy combination works only by assuming away the problem, we then devise a model to study the optimal policies in a second best world. Our results show that, in general, both factor subsidies (or taxes) and export subsidies (or taxes) are needed to achieve this constrained optimum.

Date: 1975-06-01
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... 81b6908fd562/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:197506010700001011

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().