An Empirical Study into the Determinants of an Individuals Supply of Labour

The first 200 words of this essay...

An Empirical Study into the Determinants of an Individual's Supply of Labour

James Allen

Introduction

Why does a person work the number of hours that they do? This has been a question of much research over many years by labour economists. It is a question which has important policy implications for government as to how much they should tax workers income, how high they should set the minimum wage and whether to impose a maximum working week. The information would also be useful to firms in the interests of setting suitable wages and other working conditions.

I aim to answer the question of the determinants of the number of hours worked by individuals. The data I will use for analysis purposes is a condensed dataset of the survey results of wave 15 of the British Household Panel Survey [BHPS] (2005). This survey is conducted annually amongst over 15,000 individuals by ISER at the University of Essex.

Background

Figure 1: Work-Leisure Trade-Off

In Figure 1 an individual faces a choice in the time they allocate for leisure and work day to day. Individuals are assumed in economics to be utility maximising hence the