Malakhov, Sergey (2014): Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumptionleisure choice? Forthcoming in: Expert Journal of Economics , Vol. 2, No. 2 (2014)
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Abstract
One of the applications of the prospect theory is the behavioral phenomenon of the negative elasticity of the individual labor supply. This paper argues that the negative elasticity of labor supply can be understood better with the help of the interpretation of the Slutsky equation with regard to the common consumptionleisure choice. The interpretation of the Slutsky equation corresponds to the empirical evidence that leisure is a net complement for an important part of consumption.
Item Type:  MPRA Paper 

Original Title:  Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumptionleisure choice? 
Language:  English 
Keywords:  Slutsky equation, prospect theory, labor supply, consumptionleisure choice 
Subjects:  D  Microeconomics > D1  Household Behavior and Family Economics > D11  Consumer Economics: Theory 
Item ID:  57700 
Depositing User:  Sergey Malakhov 
Date Deposited:  03 Aug 2014 13:41 
Last Modified:  29 Sep 2019 17:22 
References:  1. Barnett, V. (2006) ‘Chancing an interpretation: Slutsky’s random cycles revisited.’ European Journal of History of Economic Thought, 13 (3), 411 – 432. 2. Camerer, C., Babcock, L., Loewenstein, G., Thaler, R. (1997 [2000]) ‘Labor Supply of New York City Cab Drivers: one day at a time’. Quarterly Journal of Economics, May, 407441; Part V. Applications in Choices, Values, and Frames. D.Kahneman and A. Tversky (Eds.), Cambridge: Cambridge University Press, pp. 356370. 3. Chipman, J.S., Lenfant, J.S. (2002) Slutsky’s 1915 Article: How It Came to be Found and Interpreted. History of Political Economy, 34 (3), 553597. 4. Cook, P.J. (1972) ‘A “One Line” Proof of the Slutsky Equation.’ American Economic Review, 62 (1/2), 139. 5. Malakhov, S. (2014a) ‘Satisficing Decision Procedure and Optimal ConsumptionLeisure Choice.’ Forthcoming in International Journal of Social Science Research, 2 (2) http://mpra.ub.unimuenchen.de/57393/ 6. Malakhov, S. (2014b) ‘Sunk Costs of Consumer Search: Economic Rationality of Satisficing Decision’ Forthcoming in Theoretical an Practical Research in Economic Fields, 5,1(9). http://mpra.ub.unimuenchen.de/55089/ 7. Nicholson, W. (1992) ‘Microeconomic Theory: basic principles and extensions” 5th ed. Dryden Press, Fort Worth. 8. Rousslang, D.J., Tokarick, S.P. (1995) ‘Estimating the Welfare Cost of Tariffs: The Roles of Leisure and Domestic Taxes.’ Oxford Economic Papers New Series, 47 (1), 8397 9. Slutsky, E.E. (1915 [1952]) ‘Sulla teoria del bilanco del consumatore’ G. Econ. Riv. Statist., 51,126.  Engl. transl.: On the theory of the budget of the consumer // Readings in price theory / Eds. by G. J. Stigler, K. E. Boulding. Homewood (111.), 1952. P. 2756. 10. Slutsky, E.E. (1927). Slozhenie sluchainykh prichin, kak istochnik tsiklicheskikh protsessov.Voprosy kon’’yunktury, 3, 34 – 64. 11. Slutsky, E.E. (1937). The summation of random causes as the source of cyclical processes. Econometrica, 5, 105 – 46. 12. Thaler, R. (1980) “Toward a Positive Theory of Consumer Choice”. Journal of Economic Behavior and Organization, 1, 3960. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/57700 
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Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumptionleisure choice? (deposited 22 Feb 2014 05:39)

Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumptionleisure choice? (deposited 08 May 2014 13:39)
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Slutsky equation and negative elasticity of labor supply: behavioral bias or optimal consumptionleisure choice? (deposited 08 May 2014 13:39)