[Your Nightmare]

LOL, now that is funny. Where do I find these workers? I find once workers take home enough money to pay their bills they tend to stop working.

That's called the income effect and it is the yin to the substitution effect's (what CG was describing) yang. Empirical studies have shown that increases in wages have very little effect on the labor supply and for certain portion of the population, increased wages can actually decrease the labor supply for the very reason you describe.

I don't know if Kotlikoff's model accounts for the income effect. I do know that Jorgenson's doesn't thus he gets a 30% increase in labor supply the first year.

[Conservative Goddess]

Hmmm....I'm dredging up some ancient memories now. Never made this connection before.....Seems to me that Income effect is the income corollary to the consumption side "giffen good" ...Wonder if we'll see any giffen goods emerge here......