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LABOUR SUPPLY AND INCOME UNCERTAINTY: THE GEOMETRY OF A SPECIAL CASE

M.K. BLOCK (Naval Postgraduate School Monterey, California)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 1 January 1974

64

Abstract

The effect of increased uncertainty on the agent's allocation decision is an intriguing general question and has recently received some systematic attention in the literature. Sandmo has analyzed the effect of savings rate uncertainty on the savings decision and both he and Leland have explored the effect of “income uncertainty” on the same decision. In addition, Leland has investigated the effects of uncertainty on optimal foreign exchange positions and both authors, Leland and Sandmo have begun an exploration of the effects of uncertain demand on the firm's output decision. Finally, Block and Heineke have analyzed the effect of income, savings rate, and wage uncertainty on the agent's labour allocation. However, in all of this work there has not been a geometric treatment of even a restricted case. The purpose of this note is to develop such an analysis for a special, but interesting labour allocation problem, and thereby derive the results of income uncertainty in a transparent fashion.

Citation

BLOCK, M.K. (1974), "LABOUR SUPPLY AND INCOME UNCERTAINTY: THE GEOMETRY OF A SPECIAL CASE", Journal of Economic Studies, Vol. 1 No. 1, pp. 65-70. https://doi.org/10.1108/eb008038

Publisher

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MCB UP Ltd

Copyright © 1974, MCB UP Limited

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