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Measurement of the distribution of reservation wage using household data : price of labor from preference maps forincome and leisure
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Obi, Keiichiro
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Dokkyo University, Keio University
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Keio Economic Observatory (Sangyo Kenkyujo), Keio University
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1995
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Keio Economic Observatory occasional paper. E
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15
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1995
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1
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The labor supply probability of a person or a group of persons (labor supplier or suppliers)is given by the definite integral of the (density) distribution function of reservation wage,( a kind of latent variable), which can not be directly observed. Reservation wage canbe mathematically described using the parameters (denoted by [記号]'s) of labor suppliers'preference maps (income-leisure indifference function), because reservation wage is, bydefinition, the value of the marginal rate of substitution at hours worked equal to zero. MSPL is usefull for analysing the supply behaviorwhen the supplier faces working opportunity of employee work where the workinghours are assigned by employer. RW is convenient for analysing supply probabilitywhen the hours of work is completely adjustable to optimum hours of work.However , when we symultaneously analyse the supply probability for these twokinds of employments, that is, employee and self-employed, it will be shown in thefollowing that an alternative notion which we tentatively call the distribution ofH(d), optimal hours of work for self-employed opportunity, is more convenient andsuitable . The value of MSPL can be analytically transformed to H(d) and viceversa. This is shown in the appendix.
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This paper was presented at the 49th Session of the International Statistical Institute , Firenze, 1993.
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