ABSTRACT
This chapter begins by setting out the basic neo-classical model for a two-worker household. It examines in some detail a fairly natural extension of the Leuthold model in which each household member cares about not only their own leisure but also that of their spouse. The chapter shows how this leads to a very obvious procedure for specifying the two models in such a way that one model can be tested against the other. It argues that in fact the Leuthold model provides a significantly better fit than the neo-classical model, and compares the supply elasticities arising from the two models. The chapter illustrates a generalisation of the Leuthold model of family labour supply which allows us to test the Leuthold specification of labour supply against the neo-classical model. The neo-classical model was written as a Leuthold model with the some additional equalities, and all the elasticities were then computed in exactly the same way.
