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Longitudinal Study: HILDA
Title: What can happiness tell us about the labour supply curve?
Authors: Dockery, A.M. 
Institution: Curtin University
Publication Date: Nov-2011
Publisher: Centre for Labour Market Research
Pages: 19
Keywords: working hours
labour supply
Subjective wellbeing
Abstract: This paper proposes an alternative empirical approach to the estimation of the labour supply function, one that is based upon subjective wellbeing data and potentially addresses several limitations of the standard approach. The labour supply function in neoclassical economics is based on the idea of an ‘implicit utility function’ which assumes individuals are free to choose their ‘utility maximising’ hours of work. Clearly, this is not the case for many workers. Further, it precludes by assumption the possibility of workers choosing to work more hours than is optimal for their wellbeing, despite widespread evidence of ‘overwork’ in modern economies. Instead, it is proposed that data on hours worked, wages and subjective wellbeing be used to explicitly estimate the utility function from which the labour supply schedule and elasticity of supply with respect to wages can be derived. The approach is demonstrated using data for unpartnered male employees from the Household, Income and Labour Dynamics in Australia Survey. The results are consistent with people working longer hours than is compatible with the maximisation of wellbeing. A number of extensions and applications of the approach are suggested.
ISBN: ISSN 1329 - 2676
Keywords: Employment -- Hours; Health -- Wellbeing; Employment -- Labour force supply
Research collection: Reports and technical papers
Appears in Collections:Reports

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