Dynamic Aspects of Household Labour Supply

Abstract

In Chapter 5 we analysed household labour supply, taking the simplest static neo-lassical model as a starting point. It appeared to be well-suited to extension in various directions. These extensions allowed us to study some important aspects of household labour supply, such as the effects of taxes and social security benefits and the effects of constraints imposed by the demand side of the labour market. Nevertheless, the static nature of the model remains restrictive, as many aspects of household labour supply are of an inherently dynamic nature. For example, a proper analysis of unemployment while ignoring its dynamic aspects is difficult to imagine. Unemployment which lasts for only a few weeks poses a different problem from long-term unemployment, and it also calls for different policies. While Chapter 5 primarily analysed within-period labour supply behaviour (for example, whether to work or not, and if so, how much), the present chapter primarily analyses the timing of events related to labour supply.