Empirically, all else equal, do income effects on labor supply dominate substitution effects on labor supply?
In other words, holding all else constant, will growth in TFP (or permanent cuts in tax rates) lead to less hours allocated to the market? Likewise, we people work more or less if we permanently reduce marginal tax rates on income?” In forming your answers, try to think how you would test this question. There are many avenues you can go with this question. Try to pick one that allows you to formulate tests of your hypothesis. As a related question, how should innovations in home production technology (or a reduction in price of goods that are substitutes for home production time) affect the labor supply elasticities of men and women? (Mark Aguiar and I are currently thinking about this question, we want someone to work on this with us.) ————————————————————————————————————————————————————————————- Homework 4 (Due in Class November 5 – week 6) Part 1: Referee Reports.
