The Theory of Real Wage Indices
Abstract
Recently in this Review, John Pencavel and P. J. Lloyd have given insights into the measurement of real wages. Their work is an application of the concepts of true cost of living indices to a joint labor supply and commodity demand decision. Pencavel (1977) and Lloyd (1979) offer several forms of real wage indices which are derived from explicit functional forms for utility. This paper examines the theory of real wage indices in a more general setting and derives bounding indices which are independent of the functional form for utility.
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