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Modeling Labor Supply Through Duality and the Slutsky Equation

International Journal of Economic Sciences and Applied Research, Vol. 3, No. 2, pp. 111-122, 2010

12 Pages Posted: 25 Jan 2011  

Julia Dobreva

affiliation not provided to SSRN

Ivan Ivanov

affiliation not provided to SSRN

Date Written: September 12, 2010

Abstract

In the present paper an analysis of the neo-classical optimization model with linear constraints is proposed. By introducing the dual problem it is shown that the solution to the maximization problem is also a solution to the minimization problem. The purely theoretical model proposes a universal equation, similar to the Slutsky equation as derived in the consumption theory. Another application is needed, different from the standard applications of the model found in economic literature. This application is based on the study of the change in optimality caused by the taxes on labor. The application focuses on how they impact the optimal decision in the choice between leisure and labor through the application of the classification derived on the basis of the Slutsky equation.

Keywords: Labor Optimization, Duality, The Slutsky Equation, Tax Rates

JEL Classification: C61, C62, D11

Suggested Citation

Dobreva, Julia and Ivanov, Ivan, Modeling Labor Supply Through Duality and the Slutsky Equation (September 12, 2010). International Journal of Economic Sciences and Applied Research, Vol. 3, No. 2, pp. 111-122, 2010. Available at SSRN: https://ssrn.com/abstract=1747004

Julia Dobreva (Contact Author)

affiliation not provided to SSRN ( email )

Ivan Ivanov

affiliation not provided to SSRN ( email )

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