Consumption function, labour supply rationing and borrowing constraints
Koskela, Erkki; Virén, Erkki (09.07.1984)
Numero
12/84Julkaisija
Bank of Finland
1984
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2023070374182Tiivistelmä
The purpose of this paper is first to derive consumption functions in the presence of both endogenous and rationed labour supply by assuming neither contemporaneous nor intertemporal separability of the utility function in goods and leisure, second to show how the properties of consumption functions depend on the question of whether borrowing constraints are binding or not and finally, to subject these consumption functions to an empirical test concerning labour market assumption by using Finnish quarterly data over the period 1961.1-1980.3. Neither 'market clearing' nor 'labour supply rationing' model turns out to be clearly superior.