Econometrica: May 1979, Volume 47, Issue 3

The Joint Allocation of Leisure and Goods Expenditure

https://doi.org/0012-9682(197905)47:3<539:TJAOLA>2.0.CO;2-T
p. 539-564

William A. Barnett

Conventionally labor supply modeling has been dichotomized from consumption expenditure allocation. We estimate a model unifying both aspects of the consumer's decision problem, and we test for the two-stage decision implied by the conventional dichotomy. We investigate the gains from joint modeling. We use a version of the Rotterdam model recently shown by Barnett [6] to be derivable at the aggregate level under weaker assumptions than those needed to acquire empirically usable theoretical results at the aggregate level with other models; our results are not subject to the restrictiveness imputed to earlier uses of versions of the Rotterdam model.

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