Lecture 8 - Lecture Lecture 8 Labor Supply I Roadmap...

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ecture 8 Lecture 8 Labor Supply I
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oadmap Roadmap eneral Trends in Labor Supply General Trends in Labor Supply. • The Labor vs. Leisure Choice. • Example Problem.
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eneral Trends Since 1950 General Trends Since 1950 ise in female labor supply Rise in female labor supply. • Decline in male labor supply – particularly r older men and young men for older men and young men. • Such changes are not specific to the US.
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emale Labor Supply Female Labor Supply
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ale Labor Supply Male Labor Supply
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ther Nations Other Nations
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an you think of possible reasons for • Can you think of possible reasons for these changes? • Cultural shifts • Policy changes emographic changes Demographic changes • Medical advances
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heory: The Decision to Work Theory: The Decision to Work he decision to work (the number of The decision to work (the number of hours of labor supplied to the market) is function of three things: a function of three things: 1) Preferences for leisure (given) 2) The opportunity cost of leisure (wage) 3) Wealth
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he Wage The Wage • The wage is the opportunity cost of having one more hour of leisure. • That is, we give up W to work one less our hour. • We can think of ourselves as buying leisure, where an hour of leisure cost W per hour.
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Leisure Money Choice • The choice between leisure and money is similar to the choice between apples and oranges. – Think of leisure and a good (X 1 ) and think of money as a good (X 2 ). – When we work, we trade leisure for money (similar to trading apples for oranges). – We have 16 hours in a day which is equal to 16W if we spend it all on money, or 16 hours of leisure we spend it all on leisure. (Think of the total if we spend it all on leisure. (Think of the total hours in the day as the budget constraint).
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Time is spent on leisure or working • We typically assume that people sleep for 8 hours a day. • As such there are 16 hours remaining to be spent working or enjoying leisure.
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This note was uploaded on 01/09/2010 for the course ILRLE 2400 at Cornell University (Engineering School).

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Lecture 8 - Lecture Lecture 8 Labor Supply I Roadmap...

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