Research Paper No. 535

POVERTY, LABOUR SUPPLY AND WELFARE WHEN UTILITY DEPENDS ON A POVERTY LEVEL

by

John Creedy

September 1996

Department of Economics. University of Melbourne. Parkville Victoria 3052 Australia

ABSTRACT

CONTENTS

1. Introduction ............................................................p. 3

2. Labour Supply ........................................................p. 6

2.1 The utility function ..................................................p. 6

2.2 Interior solutions .....................................................p. 7

2.3 Avoiding poverty ...................................................p. 8

2.4 Diagrammatic form ...............................................p. 11

3. The Government Budget Constraint ........................p. 12

4. Social Welfare and Poverty .....................................p. 15

4.1 The social welare funtion .......................................p. 15

4.2 Poverty measures ..................................................p.17

5. Simulation Results ...................................................p. 18

6. Conclusions ............................................................p. 22
 
 

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