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The Hausman-MaCurdy Controversy - Why do results differ between studies?

Author

Listed:
  • Eklöf, Matias

    (Department of Economics)

  • Sacklén, Hans

    (FIEF)

Abstract

The two perhaps most influential empirical labor supply studies carried out in the U.S. in recent years, Hausman (1981) and MaCurdy, Green & Paarsch (1990), report sharply contradicting labor supply estimates. In this paper we seek to uncover the driving forces behind the seemingly irreconcilable results. Our findings suggest that differences with respect to the estimated income and wage effects can be attributed to the use of differing nonlabor income and wage measures, respectively, in the two studies. Monte Carlo experiments suggest that the wage measure adopted by MaCurdy et al might cause a severely downward biased wage effect such that data falsely refute the basic notion of utility maximization.

Suggested Citation

  • Eklöf, Matias & Sacklén, Hans, 1997. "The Hausman-MaCurdy Controversy - Why do results differ between studies?," Working Paper Series 1997:30, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:1997_030
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    References listed on IDEAS

    as
    1. Blomquist, Soren, 1996. "Estimation methods for male labor supply functions How to take account of nonlinear taxes," Journal of Econometrics, Elsevier, vol. 70(2), pages 383-405, February.
    2. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
    3. Hausman, Jerry A., 1985. "Taxes and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 4, pages 213-263, Elsevier.
    4. Aaron, Henry J., 2001. "Handbook of Health Economics," Journal of Health Economics, Elsevier, vol. 20(5), pages 847-854, September.
    5. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On economics: Germs of choice
      by Matt Nolan in TVHE on 2014-03-13 23:30:04

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    More about this item

    Keywords

    Labor supply; Slutsky condition; maximum likelihood estimation;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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