Key Questions and Recent Research Advances on Harmful Algal Blooms in Benthic Systems

Abstract

In this paper we generalize the Alchian-Allen substitution theorem so as to account for income and endowment effects. We then apply the generalized version to the labor-leisure-child-care decision of a mother with young children. In this framework we find: (i) For mothers who work only a few hours a week, a rise in wages increases (under mild qualifications) the demand for leisure relative to child care, an effect in line with the Alchian-Allen result; (ii) given empirical evidence that an increase in wages induces mothers to spend less time on leisure and more with children, the generalized Alchian-Allen theorem shows that this requires the income elasticity of child care to be substantially higher than that of leisure. This finding, though, imposes substantial restrictions on reasonable specifications of a mother’s utility function.