Testing for separability between commodity demand and labour supply in West Germany

Abstract

In this paper we use a methodology for testing for separability of commodity demands from male and female labour supply on a single cross section. In the empirical section of our paper we apply the methodology to a representative micro data base for West Germany. We estimate the corresponding demand systems for nine goods, analyse their economic properties and test the hypothesis that male and female leisure are separable from commodity demand. We reject the hypothesis that goods are separable from male and female time. Moreover, we show the implications of our results for optimal taxation of goods and labour supply.