Advanced Search
MyIDEAS: Login to save this paper or follow this series

Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity

Contents:

Author Info

  • Prowse, Victoria L.

    ()
    (Cornell University)

Abstract

This paper extends existing work on labor force participation dynamics by distinguishing between full-time and part-time employment and allowing unobserved heterogeneity in the effects of previous employment outcomes, children and education on employment dynamics. The results reveal significant autocorrelation in unobservables, and significant variation in the effects of children and education on labor supply preferences. Moreover, omission of random coeffcients or autocorrelation can bias significantly estimates of policy effects. On average, policies temporarily incentivizing part-time and full-time employment are equally effective tools for reducing non-employment. However, non-employment among women with young children is more responsive to policies encouraging part-time rather than full-time work.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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: http://ftp.iza.org/dp4889.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4889.

as in new window
Length: 41 pages
Date of creation: Apr 2010
Date of revision:
Publication status: published in: Journal of Business and Economic Statistics, 2012, 30 (2), 411-431
Handle: RePEc:iza:izadps:dp4889

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:

Related research

Keywords: state dependence; discrete labor supply; unobserved heterogeneity; repeated multinomial choice;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
  2. J. A. Hausman & D. A. Wise, 1976. "A Conditional Profit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Working papers 173, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, Econometric Society, vol. 56(6), pages 1371-95, November.
  4. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt3tb6j874, University of California Transportation Center.
  5. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  6. Manning, Alan & Petrongolo, Barbara, 2006. "The Part-Time Pay Penalty for Women in Britain," IZA Discussion Papers 2419, Institute for the Study of Labor (IZA).
  7. Bingley, Paul & Walker, Ian, 1997. "The Labour Supply, Unemployment and Participation of Lone Mothers in In-Work Transfer Programmes," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(444), pages 1375-90, September.
  8. Gianna Claudia Giannelli & Chiara Monfardini, 2001. "JOINT DECISIONS ON HOUSEHOLD MEMBERSHIP AND HUMAN CAPITAL ACCUMULATION OF YOUTHS The role of expected earnings and local markets," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp02_01, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  9. Connolly, Sara & Gregory, Mary, 2007. "Moving Down: Women’s Part-time Work and Occupational Change in Britain 1991–2001," IZA Discussion Papers 3106, Institute for the Study of Labor (IZA).
  10. Marco Francesconi, 2002. "A Joint Dynamic Model of Fertility and Work of Married Women," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 20(2), pages 336-380, Part.
  11. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
  12. Victoria Prowse, 2005. "State Dependence in a Multi-state Model of Employment," Economics Papers 2005-W20, Economics Group, Nuffield College, University of Oxford.
  13. John Fitzgerald & Peter Gottschalk & Robert Moffitt, 1998. "An Analysis of Sample Attrition in Panel Data: The Michigan Panel Study of Income Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 251-299.
  14. Altug, Sumru & Miller, Robert A, 1998. "The Effect of Work Experience on Female Wages and Labour Supply," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(1), pages 45-85, January.
  15. Bunch, David S., 1991. "Estimability in the Multinomial Probit Model," University of California Transportation Center, Working Papers qt1gf1t128, University of California Transportation Center.
  16. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
  17. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  18. John Geweke, 1995. "Monte Carlo simulation and numerical integration," Staff Report, Federal Reserve Bank of Minneapolis 192, Federal Reserve Bank of Minneapolis.
  19. Chris Forman, 2005. "The Corporate Digital Divide: Determinants of Internet Adoption," Management Science, INFORMS, INFORMS, vol. 51(4), pages 641-654, April.
  20. Prowse, Victoria L., 2005. "State Dependence in a Multi-State Model of Employment Dynamics," IZA Discussion Papers 1623, Institute for the Study of Labor (IZA).
  21. Dansie, B. R., 1985. "Parameter estimability in the multinomial probit model," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 19(6), pages 526-528, December.
  22. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  23. van Soest, Arthur & Das, Marcel & Gong, Xiaodong, 2002. "A structural labour supply model with flexible preferences," Journal of Econometrics, Elsevier, Elsevier, vol. 107(1-2), pages 345-374, March.
  24. Bolduc, Denis, 1992. "Generalized autoregressive errors in the multinomial probit model," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 26(2), pages 155-170, April.
  25. Train, Kenneth, 2000. "Halton Sequences for Mixed Logit," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt6zs694tp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  26. Bhat, Chandra R., 2001. "Quasi-random maximum simulated likelihood estimation of the mixed multinomial logit model," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 35(7), pages 677-693, August.
  27. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(2), pages 193-200, April.
  28. Kubin, Ingrid & Prinz, Aloys, 2002. "Labour supply with habit formation," Economics Letters, Elsevier, Elsevier, vol. 75(1), pages 75-79, March.
  29. Bunch, David S., 1991. "Estimability in the multinomial probit model," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 25(1), pages 1-12, February.
  30. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  31. Alan Manning & Barbara Petrongolo, 2005. "The part-time pay penalty," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 4614, London School of Economics and Political Science, LSE Library.
  32. Heckman, James J & Willis, Robert J, 1977. "A Beta-logistic Model for the Analysis of Sequential Labor Force Participation by Married Women," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(1), pages 27-58, February.
  33. Hausman, Jerry A & Wise, David A, 1979. "Attrition Bias in Experimental and Panel Data: The Gary Income Maintenance Experiment," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 455-73, March.
  34. Woittiez, Isolde & Kapteyn, Arie, 1998. "Social interactions and habit formation in a model of female labour supply," Journal of Public Economics, Elsevier, Elsevier, vol. 70(2), pages 185-205, November.
  35. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, Elsevier, vol. 77(2), pages 211-220, October.
  36. Booth, Alison L & Jenkins, Stephen P & Serrano, Carlos, 1997. "New Men and New Women? A Comparison of Paid Work Propensities from a Panel Data Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1775, C.E.P.R. Discussion Papers.
  37. Keane, Michael P, 1997. "Modeling Heterogeneity and State Dependence in Consumer Choice Behavior," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 15(3), pages 310-27, July.
  38. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(3), pages 473-522, June.
  39. Rust, John, 1996. "Numerical dynamic programming in economics," Handbook of Computational Economics, Elsevier, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 14, pages 619-729 Elsevier.
  40. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  41. Duncan, Alan & Giles, Christopher, 1996. "Labour Supply Incentives and Recent Family Credit Reforms," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(434), pages 142-55, January.
  42. Ben-Akiva, M. & Bolduc, D. & Bradley, M., 1993. "Estimation of Travel Choice Models with Randomly Distributed Values of Time," Papers, Laval - Recherche en Energie 9303, Laval - Recherche en Energie.
  43. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, Econometric Society, vol. 67(6), pages 1255-1294, November.
  44. Harris, Katherine M. & Keane, Michael P., 1998. "A model of health plan choice:: Inferring preferences and perceptions from a combination of revealed preference and attitudinal data," Journal of Econometrics, Elsevier, Elsevier, vol. 89(1-2), pages 131-157, November.
  45. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  46. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, Econometric Society, vol. 62(1), pages 95-116, January.
  47. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
  48. Geweke, John F. & Keane, Michael P. & Runkle, David E., 1997. "Statistical inference in the multinomial multiperiod probit model," Journal of Econometrics, Elsevier, Elsevier, vol. 80(1), pages 125-165, September.
  49. Layard, Richard & Bean, Charles, 1989. " Why Does Unemployment Persist?," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 91(2), pages 371-96.
  50. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, SUNY-Oswego, Department of Economics, number comp1, Spring.
  51. John Bound & Michael Schoenbaum & Todd R. Stinebrickner & Timothy Waidmann, 1998. "The Dynamic Effects of Health on the Labor Force Transitions of Older Workers," NBER Working Papers 6777, National Bureau of Economic Research, Inc.
  52. Bover, Olympia, 1991. "Relaxing Intertemporal Separability: A Rational Habits Model of Labor Supply Estimated from Panel Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(1), pages 85-100, January.
  53. Diane M. Dancer & Denzil G. Fiebig, 2004. "Modelling Students at Risk," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 158-173, 06.
  54. Keane, Michael, 1993. "Simulation estimation for panel data models with limited dependent variables," MPRA Paper 53029, University Library of Munich, Germany.
  55. Shaw, Kathryn L, 1989. "Life-Cycle Labor Supply with Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 431-56, May.
  56. Heckman, James J & Borjas, George J, 1980. "Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 47(187), pages 247-83, August.
  57. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 18(1), pages 47-82, January.
  58. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(3), pages 535-60, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Taehyun Ahn, 2010. "Employment Dynamics of Married Women and the Role of Part-Time Work: Evidence from Korea," Working Papers, Research Institute for Market Economy, Sogang University 1003, Research Institute for Market Economy, Sogang University.
  2. Wunder, Christoph & Riphahn, Regina, 2013. "Welfare transitions before and after reforms of the German welfare system," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79715, Verein für Socialpolitik / German Economic Association.
  3. Ahn, Taehyun, 2012. "Employment Dynamics of Married Women and the Role of Part-time Work: the Case of Korea," Hitotsubashi Journal of Economics, Hitotsubashi University, Hitotsubashi University, vol. 53(1), pages 25-38, June.
  4. K. Sudhir & Nathan Yang, 2014. "Exploiting the Choice-Consumption Mismatch: A New Approach to Disentangle State Dependence and Heterogeneity," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1941, Cowles Foundation for Research in Economics, Yale University.
  5. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2014. "Time aggregation and state dependence in welfare receipt," Discussion Papers, Research Department of Statistics Norway 771, Research Department of Statistics Norway.
  6. Haan, Peter, 2010. "A Multi-state model of state dependence in labor supply: Intertemporal labor supply effects of a shift from joint to individual taxation," Labour Economics, Elsevier, Elsevier, vol. 17(2), pages 323-335, April.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp4889. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.