Empirical Findings

Theory does not tell us whether the labor supply of a group will react positively or negatively to.a wage change. Will an income-tax increase on high-income workers-which reduces their after-tax wages cause them to reduce their work effort? Will subsidizing the wages of the working poor reduce or in- ·crease their hours worked? These vital questions must be considered by the president and legislators as they weigh issues of equity and efficiency. We often need to know the exact shape or elasticity of the labor supply curve.

Table 13-2 presents a summary of numerous studies of the subject. This survey shows that the labor supply curve for adult males appears to be slightly backward-bending, while the responses of other mo graphic groups look more like a conventional upward- sloping supply curve. For the population as a whole, labor supply appears to respond to a change in real wages.

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