Journal Article

A backward‐bending labor supply curve without an income effect

Chung‐cheng Lin

in Oxford Economic Papers

Volume 55, issue 2, pages 336-343
Published in print April 2003 | ISSN: 0030-7653
Published online April 2003 | e-ISSN: 1464-3812 | DOI: http://dx.doi.org/10.1093/oep/55.2.336
A backward‐bending labor supply curve without an income effect

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This paper proposes an explanation of the backward‐bending labor supply curve that is not based on the premise that the income effect dominates the substitution effect. Unlike the classical labor supply theory that treats working hours and work effort as being synonymous, this paper treats them as distinct variables in an efficiency wage model. A wage rate increase is shown to give rise to two direct substitution effects that motivate the worker to provide more effort and hours. When a greater effort exerts a cross substitution effect that reduces hours, the hour supply curve may bend backward in the absence of an income effect.

Journal Article.  0 words. 

Subjects: Economics

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