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Binary Choice with Binary Endogenous Regressors in Panel Data: Estimating the Effect of Fertility on Female Labor Participation

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Author Info
Carrasco, Raquel

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Abstract

This article considers the estimation of the causal effect of fertility on female-labor-force participation equations. My main concern is to examine two considerations, the endogeneity of fertility and the impact of controlling for unobserved heterogeneity and for predetermined existing children. Using PSID data, a switching binary panel-data model that accounts for selectivity bias as well as for other forms of time-invariant unobserved heterogeneity is estimated. Individual effects are allowed to be correlated with the explanatory variables, which can be predetermined as opposed to strictly exogenous. Family sex composition is used as an instrument for exogenous fertility movements. The results indicate that exogeneity assumptions of children variables induce a downward bias in absolute value in the estimated negative effect of fertility on participation, although the failure to account for unobserved heterogeneity overstates this effect. Moreover, stronger effects of fertility are found when existing children are treated as predetermined but not strictly exogenous variables.

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Publisher Info
Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 19 (2001)
Issue (Month): 4 (October)
Pages: 385-94
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Handle: RePEc:bes:jnlbes:v:19:y:2001:i:4:p:385-94

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  1. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, vol. 88(3), pages 450-77, June. [Downloadable!] (restricted)
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  2. Becker, Gary S, 1985. "Human Capital, Effort, and the Sexual Division of Labor," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages S33-58, January. [Downloadable!] (restricted)
  3. Rosenzweig, Mark R & Wolpin, Kenneth I, 1980. "Life-Cycle Labor Supply and Fertility: Causal Inferences from Household Models," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 328-48, April. [Downloadable!] (restricted)
  4. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October. [Downloadable!] (restricted)
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  5. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May. [Downloadable!] (restricted)
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  6. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  7. Schmidt, Peter & Strauss, Robert P, 1975. "Estimation of Models with Jointly Dependent Qualitative Variables: A Simultaneous Logit Approach," Econometrica, Econometric Society, vol. 43(4), pages 745-55, July. [Downloadable!] (restricted)
  8. Ben-Porath, Yoram & Welch, Finis, 1976. "Do Sex Preferences Really Matter?," The Quarterly Journal of Economics, MIT Press, vol. 90(2), pages 285-307, May. [Downloadable!] (restricted)
  9. Alice Nakamura & Masao Nakamura, 1992. "The econometrics of female labor supply and children," Econometric Reviews, Taylor and Francis Journals, vol. 11(1), pages 1-71. [Downloadable!] (restricted)
  10. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-99, July. [Downloadable!] (restricted)
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  11. James J. Heckman & Thomas E. MaCurdy, 1985. "A Simultaneous Equations Linear Probability Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 28-37, February. [Downloadable!] (restricted)
  12. Arellano, M & Carrasco, R, 1996. "Binary Choice Panel Data Models with Predetermined Variables," Papers 9618, Centro de Estudios Monetarios Y Financieros-.
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  13. Manski, Charles F, 1987. "Semiparametric Analysis of Random Effects Linear Models from Binary Panel Data," Econometrica, Econometric Society, vol. 55(2), pages 357-62, March. [Downloadable!] (restricted)
  14. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September. [Downloadable!] (restricted)
  15. Browning, Martin, 1992. "Children and Household Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1434-75, September. [Downloadable!] (restricted)
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