Income and Substitution Effects in Labor Economics

Page Overview | Income and Substitution Effects | Female vs Male Behavior in the Labor Market | Opportunity Cost of Leisure Time | Works Used

Sex based Wage Inequality

We consider wage inequality as one of the biggest problems in labor economics. This is why we decided to focus our attention on the wage differential, i.e. why women receive less money for the same quantity and quality of labor. The gap between men and women's payment tends to decrease worldwide, especially in the US, but we fell that this trend deserves serious consideration and analysis. For our analysis of the issue, we are using the work of Francine Blau, Feminist Economics Today by Marianne Ferber and Julie Nelson, and the research of Mark Rosenzweig.

Opportunity Cost of Leisure Time

One of the main factors that plays a role when analyzing the income and substitution effects is the opportunity cost of leisure time. The importance that a laborer places on leisure time when compared with the want to increase one's income will play the role in determining, which effect will dominate. If there is greater importance on leisure time, than increased income, the income effect will dominate. If their is greater importance on income than leisure time, substitution effect will dominate.