This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Improving the Modeling of Couples' Labour Supply

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Robert Breunig () (Australian National University)
Deborah A. Cobb-Clark () (Australian National University and IZA Bonn)
Xiaodong Gong () (Australian National University and IZA Bonn)

Additional information is available for the following registered author(s):

Abstract

We study the work hours of Australian couples, using a neoclassical labour-supply model in which couples choose from a small, realistic set of possible wife-husband working hour combinations We introduce three improvements to this standard model. First, we allow partners' preferences about non-market time to be correlated. We also correct the estimates to account for the fact that we estimate the non-observable wage rates of individuals who do not work. Lastly, we allow each individual's preferences for non-market time to be correlated with her or his wage rate. These changes, which substantially enhance the realism of the standard, discretized labour-supply model, also have an important impact on the results. We estimate the model using HILDA data and find wage elasticities of labour supply - 0.26 for men and 0.50 for women - that are twice as large as those found without these three innovations. Using simulation methods, we then analyze the expected impact of the 2005/06 Australian tax reform. As a result of the tax cuts, we expect working hours to increase by 1.7 per cent for both men and women and household after-tax incomes to increase by approximately $60 per week on average. For families with two wage earners, each earning between $25,000 and $55,000 per year, our model predicts an after-tax increase in income of $38 after accounting for these labour supply effects - much larger than the Australian Government's own prediction of $12, which does not allow for labour supply effects.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://repec.iza.org/RePEc/Discussionpaper/dp1773.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1773.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 43 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1773

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

For technical questions regarding this item, or to correct its listing, contact: (Mark Fallak).

Related research
Keywords: family labour supply; Australia; simulated maximum likelihood; discretized structural model;

Other versions of this item:

Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
D10 - Microeconomics - - Household Behavior - - - General
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. repec:cup:etheor:v:8:y:1992:i:4:p:518-52 is not listed on IDEAS
  2. Jones, Glenn & Savage, Elizabeth, 1996. "An Evaluation of Income Splitting with Variable Female Labour Supply," The Economic Record, The Economic Society of Australia, vol. 72(218), pages 224-35, September.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. Guyonne Kalb, 2002. "Estimation of Labour Supply Models for Four Separate Groups in the Australian Population," Melbourne Institute Working Paper Series wp2002n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  5. Apps, Patricia & Rees, Ray, 2000. "Household Production, Full Consumption and the Costs of Children," IZA Discussion Papers 157, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Duncan, Alan & Harris, Mark N, 2002. "Simulating the Behavioural Effects of Welfare Reforms among Sole Parents in Australia," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 264-76, September. [Downloadable!] (restricted)
    Other versions:
  7. Euwals, Rob & van Soest, Arthur, 1999. "Desired and actual labour supply of unmarried men and women in the Netherlands," Labour Economics, Elsevier, vol. 6(1), pages 95-118, March. [Downloadable!] (restricted)
    Other versions:
  8. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March. [Downloadable!]
  9. Guyonne Kalb & Hsein Kew & Rosanna Scutella, 2005. "Effects of the Australian New Tax System on Income Tax and Benefits with and without Labour Supply Responses," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(2), pages 137-158, 06. [Downloadable!] (restricted)
  10. Guyonne Kalb & Hsein Kew, 2002. "The Effect of a Reduced Allowance and Pension Taper Rate: Policy Simulations Using the Melbourne Institute Tax and Transfer Simulator," Melbourne Institute Working Paper Series wp2002n25, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  11. John Creedy & Guyonne Kalb, 2005. "Behavioural Microsimulation Modelling for Tax Policy Analysis in Australia: Experience and Prospects," Melbourne Institute Working Paper Series wp2005n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
    Other versions:
  12. Guyonne R. Kalb, 2000. "Labour Supply and Welfare Participation in Australian Two-Adult Households: Accounting for Involuntary Unemployment and the 'Cost' of Part-time Work," Centre of Policy Studies/IMPACT Centre Working Papers bp-35, Monash University, Centre of Policy Studies/IMPACT Centre. [Downloadable!]
  13. Hilary Hoynes & Richard Blundell, 2001. "Has "In-Work" Benefit Reform Helped the Labour Market?," NBER Working Papers 8546, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Denise Doiron & Guyonne Kalb, 2005. "Demands for Child Care and Household Labour Supply in Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 215-236, 09. [Downloadable!] (restricted)
    Other versions:
  15. Rosanna Scutella, 2000. "Labour supply estimates for married women in Australia," Australian Journal of Labour Economics (AJLE), The Centre for Labour Market Research (CLMR), Curtin Business School, vol. 4(3), pages 152-172, September.
  16. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier. [Downloadable!] (restricted)
    Other versions:
  17. John Creedy & Guyonne Kalb & Hsein Kew, 2003. "Flattening the Effective Marginal Tax Rate Structure in Australia: Policy Simulations Using the Melbourne Institute Tax and Transfer Simulator," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 156-172. [Downloadable!] (restricted)
  18. Denise J. Doiron, 2004. "Welfare Reform and the Labour Supply of Lone Parents in Australia: A Natural Experiment Approach," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 157-176, 06. [Downloadable!] (restricted)
  19. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September. [Downloadable!] (restricted)
  20. Apps, Patricia & Rees, Ray, 1999. "On the taxation of trade within and between households," Journal of Public Economics, Elsevier, vol. 73(2), pages 241-263, August. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Guyonne Kalb, 2007. "Children, Labour Supply and Childcare: Challenges for Empirical Analysis," Melbourne Institute Working Paper Series wp2007n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to use our services.

This page was last updated on 2009-12-14.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.