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on Labor Markets - Supply, Demand, and Wages |
| By: | Gagnon, Nickolas (Maastricht University); Bosmans, Kristof (Maastricht University); Riedl, Arno (Maastricht University) |
| Abstract: | We conduct an online experiment to study how the unfairness of chances leading to wage inequality affects labor supply decisions. We find that, at a given wage, disadvantageous wage inequality reduces labor supply, but whether this inequality stems from fair or unfair chances does not matter. That is, a procedure with fair chances does not compensate for wage inequality. Our results stand in stark contrast to prior empirical evidence showing that individuals care about fair chances when making equity judgments. |
| Keywords: | workplace inequality, labor supply, unfair chances |
| JEL: | D63 D90 J22 J31 M52 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18096 |
| By: | Lyu, Ke (Nevada State University); Fossen, Frank M. (University of Nevada, Reno) |
| Abstract: | This paper investigates the impact of minimum wage increases on nonemployer business establishments in the United States. We develop a theoretical model of occupational choice and estimate effects using panel data from the Nonemployer Statistics (2001-2020). Our identification strategy compares contiguous counties across state borders. Results show that a $1 increase in the minimum wage reduces the number of nonemployers by 0.5%-0.9%, likely due to relatively more attractive wage jobs. The effect is smaller in counties with higher shares of minorities, females, and lower education, while the transportation sector expands due to the gig economy. Further analysis reveals that higher minimum wages discourage transitions from nonemployer to employer status and increase shifts from self-employment to wage work or unemployment, showing how this regulation shapes entrepreneurship dynamics. |
| Keywords: | entrepreneurship, nonemployer businesses, minimum wages |
| JEL: | J24 J38 L26 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18101 |
| By: | Kumar, Kaushalendra (International Institute for Population Sciences); Singh, Ashish (Indian Institute of Technology Delhi); Kumar, Santosh (University of Notre Dame); Singh, Abhishek (International Institute for Population Sciences) |
| Abstract: | Using nationally representative data from India, this study estimates the effect of calorie intake on wages. To account for endogeneity and heterogeneity, we apply Instrumental Variable and Instrumental Variable Quantile Regression methods. Results suggest that higher calorie consumption positively affects workers’ wages. A 10% increase in per capita calorie intake per day leads to a 2.5% increase in daily wages. The wage effect varies by occupation type and across the wage distribution; the marginal effect of calorie intake on wage is higher at lower quantiles of the wage distribution and for non-elementary workers. Our findings highlight the need for nutritional supplementation, particularly for workers at low and median wage levels, to maximize the wage gains from nutritional public policies. |
| Keywords: | instrumental variable quantile regression, 2SLS, calorie, wages, India |
| JEL: | I14 I15 J24 J31 O15 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18100 |
| By: | Arenas-Arroyo, Esther (Vienna University of Economics and Business); Fabian, Jacob; Mengel, Friederike (University of Essex); Schmidpeter, Bernhard (Vienna University of Economics and Business); Serafinelli, Michel (King's College London) |
| Abstract: | How does firms' skill demand change as the business landscape evolves? We present evidence from the green transition by analyzing how hurricanes impact demand for green skills. These disasters signal the risks of not acting on environmental issues. Using data from U.S. online job postings (2010--2019) and hurricane paths, we create a new measure of green job postings. Firms in areas affected by hurricanes are 6.4\% more likely to post jobs that require green skills after the event, particularly those serving local markets. |
| Keywords: | online job postings, green transition, green skills, hurricanes |
| JEL: | J23 Q54 L20 J24 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18102 |
| By: | Silliman, Mikko (Aalto University); Willén, Alexander (Norwegian School of Economics) |
| Abstract: | This paper reconsiders how labor market competition shapes skill development --- integrating the perspectives of both firms and workers. We show that competition serves as a catalyst for learning. It creates outside opportunities which incentivize workers to invest in their own skills, and it imposes innovation pressure that raises the value of training for firms. Using linked Norwegian survey and administrative data together with vignette experiments, we find that workers in more competitive markets accumulate skills faster than workers in concentrated markets—primarily through informal learning—and that these gains are concentrated in higher-order, transferable skills. Firms in competitive environments also invest more in formal training, treating it as a strategic necessity rather than a dispensable cost. Experimental evidence complements these findings by showing that both workers and managers expect greater returns to learning and human capital investments in competitive markets. Together, these results challenge the canonical view of competition as a source of market failure in training and instead highlight its role in facilitating both worker-led and firm-led investments in human capital. |
| Keywords: | human capital, competition, skills |
| JEL: | J24 J31 J42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18109 |
| By: | Andrés Ham (Universidad de los Andes); Emmanuel Vazquez (CEDLAS-IIE-FCE-UNLP); Monica Yanez-Pagans (Education Global Practice. The World Bank) |
| Abstract: | Transitioning toward sustainable development practices is expected to result in broad changes to economic activity, which will subsequently impact labor markets and change the demand for skills. India established the Skill Council for Green Jobs to identify green jobs and define the skills required for these occupations. This paper applies the Skill Council for Green Jobs definition of green jobs and an international definition of carbon-intensive jobs to data from the 2019-20 Periodic Labour Force Survey to estimate the size of green and carbon-intensive employment, document patterns between and within occupations, characterize workers by attributes and skills, and study wage differentials. The results highlight the importance of monitoring green and carbonintensive jobs with robust labor market monitoring systems to guide decisions on the sustainability transition and suggest key aspects to consider when investing in green skills and the potential distributive consequences of sustainability policies on the population. |
| JEL: | J23 J24 J49 Q01 Q56 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:dls:wpaper:0354 |
| By: | Lavecchia, Adam M. (McMaster University); Stutely, James |
| Abstract: | This paper documents sharp bunching in third-party reported employment earnings at a basic exemption for social security contributions among older workers. Beginning in 2012, workers age 60-64 who were receiving a public pension were required to make social security contributions equal to 9.9 percent of their employment earnings above a basic exemption threshold of $3, 500. Using administrative data on third-party reported earnings and a differences-in- bunching estimator we document sharp bunching at the $3, 500 threshold. We argue that our results represent new evidence on the role of firms in mediating the earnings response to payroll taxes. |
| Keywords: | sharp bunching, social security contributions, employment earnings |
| JEL: | H20 H24 H25 H31 H32 H55 J22 J23 J38 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18106 |
| By: | Mantej Pardesi; Frank Corvers; Harald Pfeifer |
| Abstract: | We study how investment spikes in technologies and complementary infrastructure influence firms' hiring and training strategies. While prior work emphasizes how technologies reallocate skill demand, few focus on how firms acquire the required skills. Using linked employer-employee data on German establishments, we identify spikes by their technological composition and capital vintages. Event study estimates show that investment spikes in ICT and production line technologies lead to an upscaling effect raising employment by external hiring followed by training of young apprentices. Combining technologies with factories and plants induces firms to use apprenticeship training without an increase in external hiring. Incumbent workers are trained when investment spikes renew the vintage of firm's capital. Our findings support a vintage human capital framework in which technology adoption induces firms to gradually adjust workforce through hiring and training while preserving expertise of incumbent workers. |
| Keywords: | investment spikes, technology adoption, technology vintages, training, skill formation |
| JEL: | J24 D22 O33 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0249 |
| By: | Gustavo de Souza |
| Abstract: | I use administrative data on artificial intelligence (AI) software created in Brazil to study its effects on the labor market. Owing to a unique copyright system, Brazilian firms have registered their software with the government since the 1980s, creating a detailed record of nearly all commercial AI applications developed in the country. Drawing on this registry, I show that AI is widely used not only in administrative tasks but also in production settings, where it primarily supports process optimization and quality control. Using an instrument based on variation in software development costs, I find that AI affects administrative and production workers differently. Among office workers, AI reduces employment and wages, particularly for middle-wage earners. Among production workers, it increases employment of low-skilled and young workers operating machinery. These results suggest that AI displaces routine office tasks while making machines more productive and easier to operate, leading to a net increase in employment. |
| Keywords: | Artificial intelligence; Automation; software; inequality |
| JEL: | J23 J24 F63 |
| Date: | 2025–07–21 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:101714 |
| By: | Lorenzo Lagos |
| Abstract: | This paper studies how collective bargaining affects both wages and amenities. By merging collective bargaining agreements (CBAs) to linked employer-employee data in Brazil, I combine rich contracted amenities with wage information. I implement a difference-in-difference strategy that exploits a court ruling enforcing CBA continuation (i.e., ultractivity) to estimate the effects of union bargaining power. Strengthening unions raises wages and amenities without reducing employment—increasing retention despite some labor-labor substitution. A revealed preference approach shows that amenities account for 45% of total compensation gains. These findings suggest that collective bargaining can offset monopsony power, but employers retain the right-to-manage workforce composition. |
| JEL: | J32 J42 J52 K31 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34186 |
| By: | Marcelo L. Bergolo; Rodrigo Ceni; Mathias Fondo; Damián Vergara |
| Abstract: | This paper leverages a large minimum wage reform in Uruguay to study the effects of minimum wages on the distribution of firm wage premia. Wage inequality decreased substantially after the reform, with almost all of the decrease attributed to a reduction in between-firm inequality. AKM variance decompositions show that the relative variance of firm fixed effects substantially decreased after the reform. A time-varying AKM model reveals that this pattern was driven by a compression in the distribution of firm fixed effects, with low-paying firms increasing their fixed effect after the minimum wage increase. Both firm-level and worker-level difference-in-differences analyses show that the minimum wage reform had a causal effect on the compression in the distribution of firm wage premia. The results suggest that minimum wages can increase the supply of "good jobs" by "making bad jobs better", in addition to reallocating workers towards "good jobs". |
| JEL: | J01 J08 J30 J38 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34188 |
| By: | Carlos Alberto Coca Gamito (Asian Development Bank); Silvia Garcia Mandico (Asian Development Bank) |
| Abstract: | Young people in Bhutan face rising rates of exclusion from employment, education, or training, and limited access to quality jobs, despite gains in education. Entrepreneurship is often viewed as an alternative pathway, but most youth-led ventures remain necessity-driven, informal, and short-lived. Using data from the 2018–2023 Labor Force Survey and the 2024 Jobs and Skills Survey, this paper examines youth entrepreneurship dynamics, including motivations, earnings, productivity, and sectoral patterns. Findings show that opportunity-driven entrepreneurs—especially young women—achieve higher earnings and productivity, but few business ventures by young people transition beyond the early stages. A shift from necessity-driven to opportunity-driven entrepreneurship could yield economic gains equivalent to 1.4% of gross domestic product. Realizing this potential requires gender-responsive, stage-specific support and embedding entrepreneurship within a broader strategy for decent work and inclusive growth. |
| Keywords: | youth employment;entrepreneurship;decent work;gender and labor market;labor market dynamics |
| JEL: | J13 J21 J24 L26 O17 |
| Date: | 2025–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021528 |
| By: | Nicholas A. Carollo; Elior Cohen; Jingyi Huang |
| Abstract: | Using novel occupational data from the United States between 1860 and 1940, we evaluate Adam Smith’s core propositions regarding the division of labor, market size, innovation, and productivity. We document significant growth in occupational diversity during this period using new measures of labor specialization that we construct from workers’ self-reported job titles in the decennial census. Consistent with Smith’s hypotheses, we find strong empirical evidence that labor specialization increases with the extent of the market, is facilitated by technological innovation, and is ultimately associated with higher manufacturing productivity. Our findings also extend Smith’s narrative by highlighting the role of organizational changes and innovation spillovers during the Second Industrial Revolution. These results speak to the enduring relevance of Smith’s insights in the context of an industrializing economy characterized by large firms, complex organizational structures, and rapid technological change. |
| Keywords: | division of labor; occupations; productivity growth; technological change |
| JEL: | N11 O14 J24 D24 |
| Date: | 2025–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:101725 |
| By: | Nida Çakır Melek; Elior Cohen |
| Abstract: | Understanding how occupations differ in their exposure to emissions-intensive activities is fundamental for analyzing labor market risks amid changes in the energy mix. We develop new, data-driven measures of occupational emissions intensity that capture heterogeneity across and within industries. Our baseline Occupational Emissions Score (OES), along with wage- and concentration-adjusted variations (WOES and COES), highlights substantial differences in emissions exposure across the U.S. workforce. Applying these measures, we document several new facts: emissions are highly concentrated in a small set of occupations; emissions intensity has declined over time; and even within industries, workers' exposure varies significantly by occupation. Higher-emission occupations are disproportionately held by older, male, native-born, and less-educated workers, and are concentrated in particular regions. While higher-emission occupations tend to experience lower employment growth, they show higher hourly wages and vacancy growth. An event study of coal mine closures further shows that high-emission occupations are more exposed to structural shocks. Together, our measures provide a comprehensive, granular framework for understanding occupational risk and adjustment during major economic shifts. |
| Keywords: | occupations; Emissions; labor market dynamics; Coal; energy |
| JEL: | J23 J24 J62 Q52 Q54 R11 |
| Date: | 2025–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:101703 |
| By: | Zhu, Chen; Böckerman, Petri |
| Abstract: | In genetics, heterosis refers to the phenomenon where crossbreeding within a species produces offspring with greater genetic fitness and superior phenotypic characteristics compared to their parents. We propose a novel socioeconomic heterosis hypothesis and examine whether genetic diversity at the individual level benefits economic success. Empirical results from UK Biobank (N=488, 152) indicate that people with higher genome-wide heterozygosity perform better in modern societies. We find consistent, positive links with education, earnings, leadership, height, and ownership of a home and car; a one standard deviation increase in heterozygosity is associated with 0.75% higher income and modest gains in schooling and assets. Results hold with additional controls and Bonferroni correction for multiple hypothesis testing; no effects are found for migration, diabetes, or neuroticism. The relationship rises steadily across the observed range and is stronger for men, suggesting sexual selection in socioeconomic settings. Because heterozygosity is fixed at conception, our evidence points to an underappreciated endowment shaping human capital and wealth accumulation. The contribution is to introduce and document individual-level heterosis effects in economics, offering a new channel for inequality and socioeconomic outcomes. |
| Keywords: | heterosis, genetic heterozygosity, income, education, socioeconomic achievement, sexual selection |
| JEL: | J10 J24 D31 I14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1660 |
| By: | Riukula, Krista (ETLA - The Research Institute of the Finnish Economy); Väänänen, Touko (Aalto University) |
| Abstract: | We study the impact of transport-induced agglomeration on workers' earnings, as well as the productivity and costs of establishments, in the capital region of Finland using comprehensive individual- and establishment-level registry data. To our knowledge, we are the first to jointly examine firm- and worker-level effects of agglomeration. We find that improved workplace-to-workplace accessibility increases employees’ annual earnings, particularly among workers in smaller firms. However, we find no statistically significant effects on value added or labour costs per worker at the establishment level. We propose two potential explanations for this discrepancy: (1) differences in the composition of workers between the worker- and establishment-level analyses due to, for example, new hires, and (2) rising costs associated with increased agglomeration. Further analysis reveals that enhanced accessibility leads to higher establishment employment and increased operating expenses, such as rents. Taken together, these findings suggest that the benefits of agglomeration are primarily shared between workers and property owners. |
| Keywords: | transport project, productivity, agglomeration, accessibility |
| JEL: | R41 R42 R12 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18103 |
| By: | Xiaoyue Zhang; Junjie Xia |
| Abstract: | This paper shows that in an economy where distortions prevent firms from using their profit-maximizing amounts of capital and labor, removing these distortions can generate both an efficiency gain and a higher aggregate labor share. We use firm-level data on Chinese manufacturing, mining, and public utilities in 2005 and estimate a general equilibrium model with heterogeneous productivity, technology, demand elasticities, and distortions across firms. We find that the distortions cause most firms to be too small. Removing them raises the aggregate demand for labor and, holding the aggregate labor and capital fixed, increases the wage by 57%. Consequently, the aggregate labor share rises by 24 percentage points. Aggregate productivity quadruples. |
| Keywords: | Distortions, aggregate labor share, latent market structure, firm heterogeneity |
| JEL: | C4 D3 E1 L6 O1 O5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2136 |
| By: | Cullen, Julie Berry; Dahl, Gordon B. (University of California, San Diego); De Thorpe, Richard (Princeton University) |
| Abstract: | We estimate the effects of being over- or underqualified for a job using quasi-random assignment of new enlistees to over 130 different jobs in the US Air Force. Being overqualified causes higher attrition, both during technical training and afterward when individuals are working in their assigned jobs. It also results in more behavioral problems, worse performance evaluations, and lower scores on general knowledge tests about the military taken by all workers. On the other hand, overqualification results in better performance relative to others in the same job: job-specific test scores rise both during technical training and while on the job, and these individuals are more likely to be promoted. Combined, these patterns suggest that overqualified individuals are less motivated, but still outperform others in their same job. Underqualification results in a polar opposite set of findings, suggesting these individuals are motivated to put forth more effort, but still struggle to compete when judged relative to others. Consistent with differential incentives, individuals who are overqualified are in jobs which are less valuable in terms of outside earnings potential, while the reverse is true for those who are underqualified. |
| Keywords: | retention, skill acquisition, job mismatch, promotion |
| JEL: | J24 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18098 |
| By: | Bo E. Honore; Luojia Hu |
| Abstract: | Wage growth is a key indicator of labor market conditions, but common measures often conflate individual wage changes with shifts in workforce composition. This paper develops a composition-adjusted measure of wage growth using nonparametric decomposition and program evaluation methods. The adjusted measure tracks unadjusted growth in stable periods but diverges during disruptions: during the Covid-19 pandemic, wage growth falls from 12% to 6% after adjustment. The method accommodates rich covariates, is robust to data quality issues such as rounding, heaping and top-coding, and enables distributional and subgroup analysis using micro data, offering more accurate views of underlying wage dynamics. |
| Keywords: | Wage growth; Selection; Decomposition |
| JEL: | J31 C21 C18 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:101717 |
| By: | Lindsay Jacobs; Suphanit Piyapromdee |
| Abstract: | Partial and reverse retirement are two key behaviors characterizing labor force dynamics for individuals at older ages, with half working part-time and over a third leaving and later re-entering the labor force at some point. The high rate of exit and re-entry is especially puzzling when considering the flat and declining wage profiles observed at older ages and uncertainty about future re-employment. Using Health and Retirement Study (HRS) data, we document the timing and prevalence of these behaviors and show that reverse retirees resemble permanent retirees across many observables, but differ notably in reported job stress and polygenic scores linked to stress sensitivity. To understand what drives these behaviors, we develop and estimate a dynamic model of retirement that incorporates uncertainty in wages and health, along with a novel “burnout-recovery†process representing the accumulation and dissipation of work-related stress. The model replicates key patterns in the data, accounting for over two-thirds of reverse retirement and 40 percent of transitions to part-time work—patterns that cannot be explained by health or wealth shocks alone. Our findings suggest that reverse retirement is largely a predictable response to recoverable stress rather than a reaction to shocks. Policy simulations show that part-time subsidies and sabbaticals enhance labor force attachment and welfare by reducing burnout, while eliminating the Retirement Earnings Test raises re-entry but also increases stress exposure. Together, these findings highlight the central role of stress dynamics in shaping retirement behavior and inform the design of policies to support work at older ages. |
| Keywords: | Retirement; Mental Health; Burnout |
| JEL: | J26 I12 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:238 |
| By: | Araujo Piedra, Maria Daniela; Cruz-Aguayo, Yyannu; Heineck, Guido |
| Abstract: | Since 2007, the Ecuadorian government has required teacher candidates to pass cognitive and knowledge tests before they are allowed to participate in merit-based competitions for tenured positions. We evaluate this policy by linking administrative teacher information to data from an experimental study that randomly assigned nearly 13, 000 children to their teachers. We find that test-screened tenured teachers had a significant effect of at least 10.5 percent of a SD on language learning outcomes. Although the recruitment tests screened candidates with higher cognitive skills, the classroom practice instrument used in the competitions appears to have helped identify the most effective teachers. |
| Keywords: | teacher quality;Teacher recruitment policy;Educational policy;Latin America |
| JEL: | I20 I21 I25 I28 J45 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14251 |
| By: | Renee Fry-McKibbin; Weifeng Larry Liu; Warwick J. McKibbin |
| Abstract: | Developing Asia has achieved remarkable economic growth in the last several decades but faces challenges moving from middle-income to high-income status. This paper examines the macroeconomic impacts of future productivity growth in developing Asia on the region and the world, focusing on the responses of private investment. We consider five scenarios of productivity growth driven by catch-up mechanism, with our results showing that Asia’s transition to high-income status requires continued rapid productivity growth and massive private investment. The increase in investment would significantly raise real interest rates domestically, resulting in international capital flows. Quantitatively, increased investment would be financed mainly through domestic saving, but international capital markets would also play a critical role. Productivity growth in one region generates spillover effects in others through two channels, namely international trade and capital flows. Spillover effects tend to be modestly negative in the medium term because capital flows would increase interest rates, but positive in the long term because regions with rising productivity would increase imports from other regions. Thus, competition among Asian economies and with other developing regions is not a zero-sum game as they benefit from each other in the long term. Continuous improvement in policies, institutions, and governance in developing Asia is required to achieve rapid productivity growth and to reduce the risks among economies in attracting international capital flows. Additionally, we examine two climate change scenarios and show that climate change will negatively impact productive investment and economic growth both in developing Asia and globally, as it will reduce productivity. |
| Keywords: | catch-up, macroeconomic effects, middle-income trap, population growth, global model, agriculture, manufacturing, services, G-Cubed |
| JEL: | J21 O11 O14 O41 O53 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-49 |
| By: | Miller, Anne |
| Abstract: | This paper explores the labour supply and consumer demand equations derived from a utility function created by adding two S-shaped utilities. An S-shaped cardinal utility for a commodity represents the individual’s experience of fulfilment of a need – deprivation (increasing marginal utility (MU)), subsistence (a point of inflection), sufficiency (diminishing MU), and either satiation at finite consumption with the possibility of surfeit, or satiation at infinite consumption. The utilities of commodities fulfilling the same need are weakly separable (multiplicative) and those of two commodities fulfilling different needs are strongly separable (additive). Functional forms are derived from a utility function created by adding two normal distribution functions with satiation at infinity, the parameters of which have meaningful psychological interpretations. The indifference map, demand and Engels curve diagrams are explored. The main outcomes: • Concave- (dysfunctional poverty) and convex-to-the-origin indifference curves are separated by a straight-line indifference curve, (an absolute poverty line). • Budget movements on the indifference curve map reveal: corner solutions and disequilibrium associated with dysfunctional poverty; optimisation occurs elsewhere, even with deprivation in one or other need. • The derived functional forms are functions of only the real wage rate and endowments of unearned consumption. • The derived functional form diagrams display: involuntary unemployment, disjointed curves, sticky wages and prices, wage- and price-elasticity associated with deprivation in a need, inferior normal and inferior-Giffen responses, and envelope curves. • The slope of the straight-line indifference curve, (defined by the relative-intensities-of-need), and its intercept on the endowment axis, play significant and dramatic roles in both Engels diagrams. |
| Keywords: | S-shaped cardinal utility includes increasing marginal utility expressing deprivation; additive utilities represent separate needs; dysfunctional poverty causes involuntary unemployment and disequilibrium; absolute poverty line; sticky wages. |
| JEL: | D11 J22 |
| Date: | 2025–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125699 |