Abstract
This paper develops a model based on the consumption hypothesis of H. Leibenstein (1957) and shows the following: (1) it is profitable for the employer to pay the workers a combination of cash and meals, rather than to pay only in cash, when the workers have dependants; (2) the possibility of an excess applicant's equilibrium does not arise in this case; (3) the unit cost of labor (in efficiency units) is minimized in equilibrium; and (4) the proportions of wage payment in the form of meals falls as the worker's expected income from alternative employment rises. Copyright 1989 by Royal Economic Society.
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