Is the Supply Curve of Working Hours Theoretically Valid?─A critical view based on hedonic wage theory─

Abstract

This paper argues that the conventional model of working hours has theoretical problems that the hedonic wage model can resolve. The main results are as follows. (1) If the demand curve of working hours is introduced into the system of the conventional model, it becomes overdetermined and incomplete. (2) The conventional model cannot explain market equilibrium in some simple cases, which will mean that it is theoretically incomplete. (3) In the hedonic wage model, the marginal rate of substitution of workers at equilibrium is not equal to the hourly wage rate, and the decreasing effects of income taxon working hours are either smaller or greater than what the conventional model predicts.