Abstract
Many mainstream schools of economics argue that work is a burden, while nonmainstream schools argue that this might not be entirely true. This paper aims to reconcile this difference by suggesting that individuals will balance income and leisure only after the fixed expense for their current living standard is met. Three applications show that the above explanation can reconcile different historical perspectives, explain various discrepancies about labor supply between neoclassical theory predictions and empirical findings, and reconcile the different interpretations about lottery winners’ labor supply.
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Notes
This paper uses consumption and income interchangeably.
If the criteria is not marginal utility but total utility, then work is not a burden since total utility provided by labor is positive. More details will be discussed in later sections.
This paper uses SWB, happiness and life satisfaction interchangeably.
Notably, income is controlled for. If individuals always balance income and leisure, then working hours should be associated with lower utility, i.e., \( {\beta }_{1}\) should be positive.
Specifically, the FE can be written as \( {\alpha }_{i}=\alpha +{v}_{i}\), where the constant term is estimated by placing the constraint \( \sum _{i=1}^{N}\sum _{t=1}^{{T}_{i}}{v}_{i}=0\). See https://www.stata.com/support/faqs/statistics/intercept-in-fixed-effects-model/.
In contrast, Edin & Lein (1997) show that most low-income single mothers want to return to school to increase their earning potential but generally do not have sufficient support to cover their necessary living expenses while in school.
See Luo (2021b) for a discussion.
In terms of total utility, the total utility provided by labor is positive, i.e., work is not a burden.
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Acknowledgements
I am indebted to Neel Rao for his advice. I thank Alex Anas and Peter Morgan for helpful comments. This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors. The dataset, the German Socio-Economic Panel (SOEP) Study, was made available by the German Institute for Economic Research (DIW), Berlin. I thank the staff at the DIW for their help in accessing and interpreting the data.
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Luo, J.J. Is Work a Burden? The Role of the Living Standard. Soc Indic Res 163, 61–77 (2022). https://doi.org/10.1007/s11205-022-02878-w
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DOI: https://doi.org/10.1007/s11205-022-02878-w