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Vol. 91, No. 6
Posted 2009-11-02

Local Price Variation and Labor Supply Behavior

by Dan A. Black, Natalia A. Kolesnikova, and Lowell J. Taylor

In standard economic theory, labor supply decisions depend on the complete set of prices: wages and the prices of relevant consumption goods. Nonetheless, most theoretical and empirical work in labor supply studies ignore prices other than wages. We address the question of whether the common practice of ignoring local price variation in labor supply studies is as innocuous as generally assumed.

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