Title: Part II SecondGeneration Studies of Labor Supply
1Part IISecond-Generation Studies of Labor Supply
- 1) Introduction
- 2) Wage equation
- 3) Analysis of labor force participation decision
- 4) Comparing conditional OLS and Tobit estimates
of labor supply - 5) Heckman two-stage method
21) Introduction
- Major shortcoming of first-generation studies of
labor supply neglecting the selectivity bias
(focus on working cohort only) - Data US, 1975, women
3Variables
- WHRS...labor supply.. hours worked per year in
1975 - WA..age
- WE...education in years
- WW..wage.hourly wage rate
- KL6number of children less than 6 years old
- K618 ..number of children more than 6 years old
and less than 18 years old - LWW ln(WW)
- LWHRS ln(WHRS)
- WA2(WA2)/100
- AX.labor market experience in years
- CIT.dummy variable, 1 if live in large city
42) Wage equationLn(wage)?0?1WA?2(WA)2?3WE?4A
X?5CIT
52) Wage equationLn(wage)?0?1WA?2(WA)2?3WE?4A
X
6Wages of workers vs. non-workers
73) Analysis of labor force participation
decision OLS
83) Analysis of labor force participation
decision OLS
9Problem with OLSvalues of LFP outside the range
0,1
103) Analysis of labor force participation
decision PROBIT
113) Analysis of labor force participation
decision PROBITpredicted values probability
to work
123) Analysis of labor force participation
decision PROBITMarginal effects change in
probability to work due to a marginal increase in
explanatory variables
133) Analysis of labor force participation
decision LOGIT
14LOGIT marginal effects
154) Comparing conditional OLS and Tobit estimates
of labor supply
- Avg.hours(US)ltAvg.hours(CZ)
- Higher corr(wage,edu) in the US (see next slides)
16OLS for working women
17OLS for the whole sample (constructed wages)
18TOBIT (censored point 0)
195) Heckman two-stage method
205) Heckman two-stage method