ABSTRACT
This chapter examines some of the more obvious limitations of the basic model. It shows how relaxing certain assumptions improves its explanatory powers without unduly compromising its straightforward, analytical rigour. The essential ingredients of the basic labour supply model are as follows: a utility function, institutional constraints upon labour supply, and non-linear budget constraints. The model recognises no institutionally determined limits to the individual worker’s choice as to the amounts of work and leisure he undertakes. The model deals only with the supply decision of the individual. Recognition of the household as the decision-making unit makes it possible to consider the special labour supply behaviour of secondary workers – members of the household who earn significantly less than other members. The most familiar case of a non-linearity in the budget constraint occurs because the individual possesses unearned income.
