Are Labor Supply Decisions Consistent with Neoclassical Preferences?
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World Bank, Washington, DC
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This paper studies the labor supply of
South Indian boat owners using daily labor participation
decisions of 249 boat owners during seven years. It tests
the standard neoclassical model of labor supply, which
predicts that (i) individuals should be more likely to work
when earnings are temporarily high and (ii) recent
accumulated earnings should play no role in the
participation decision. It finds that boat owners'
labor participation depends positively on expected earnings
but also on recent accumulated earnings, albeit weakly.
Participation elasticities with respect to expected earnings
range between 0.8 and 1.3 and about -0.05 and -0.01 with
respect to changes in recent income. While the standard
neoclassical model is statistically rejected, it is still a
good approximation of the labor supply behavior of boat
owners in southern India.
Palabras clave
labor market, neoclassical economic theory, boat owners, expected earnings, elasticities, labor supply, fishing