Not all Giffen goods, are inferior goods

Abstract

It is well known in the economic literature that the labour supply curve can bend backwards and, therefore, that leisure can be a Giffen good. It is also known that leisure can be a normal good. This article proves that if leisure is a Giffen good, it has to be a normal good. This result also proves that, contrary to common knowledge in economics, not all Giffen goods, are inferior goods. These results could be taken into account, for example, when finding empirical evidence and designing policies on labour supply, in an era of machine learning and artificial intelligence.

Keywords

• Leisure
• Giffen goods
• excess expenditure function
• Shephard's lemma