Econometrica: Jul 1978, Volume 46, Issue 4

The Linear Logarithmic Expenditure System: An Application to Consumption-Leisure Choice

https://doi.org/0012-9682(197807)46:4<843:TLLESA>2.0.CO;2-W
p. 843-868

Lawrence J. Lau, Pan A. Yotopoulos, Wuu-Long Lin

Using cross-sectional agricultural household accounting record data for 1967 and 1968, a linear logarithmic expenditure system, consisting of three commodities--leisure, agricultural commodities, and nonagricultural commodities--is estimated for the Province of Taiwan. The hypothesis of utility maximization, as well as other hypotheses on functional form, are tested. It is found that the empirical evidence is consistent with utility maximization and that household labor supply depends on both the composition and the size of the household as well as the wage rate and prices. The consumption demand, labor supply, and marketed surplus elasticities with espect to prices, income, household composition, and household endowment variables are also reported.

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