Labor Supply

Abstract

For economists, “labor supply” usually means the hours of work, usually per week, offered for pay or profit. This definition therefore excludes unpaid household work and voluntary work. Usually, the question of labor-force participation (the question of whether a person is working or looking for work) is treated separately. Research on both the theoretical and applied labor supply exploded in the 1980s and 1990s, with the work ranging from models of individual behavior in a static one-period model to dynamic multi-period models for a household. Simple theoretical models that gave a backward-bending supply curve (where labor supply first increased and then decreased with wage rates, for which little evidence exists) have given way to empirical labor-supply curves that are usually (but not always) positively sloped with respect to the wage rate. Beginning in the late twentieth century, much of the focus of research has been on labor supply as a whole, not on particular firms, industries, or occupations.