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Labor supply is unresponsive to permanent changes in wage rates. Thus, income and substitution effects cancel, but are they both close to zero or both large? This paper develops a theory of labor supply where income and substitution effects cancel, taking into account optimization over time, fixed costs of going to work, and interactions of labor supply decisions within the household. The paper then applies this theory to survey evidence on the response of labor supply to a large wealth shock. The evidence implies that the constant marginal utility of wealth (Frisch) elasticity of labor supply is about one.

Labor supply.

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Labor mobility --- Labor supply

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Labor supply --- Models.

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Labor --- Labor --- Labor supply --- Labor supply --- Labor economics --- Labor economics --- Working class --- Working class --- Brazil.

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Labor --- Labor --- Labor supply --- Labor supply --- Labor economics --- Labor economics --- Working class --- Working class --- Labor. --- Labor economics. --- Labor supply. --- Working class. --- Brazil.