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Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity

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  • 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.

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Bibliographic Info

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

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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

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

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Cited by:
  1. K. Sudhir & Nathan Yang, 2014. "Exploiting the Choice-Consumption Mismatch: A New Approach to Disentangle State Dependence and Heterogeneity," Cowles Foundation Discussion Papers 1941, Cowles Foundation for Research in Economics, Yale 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. Taehyun Ahn, 2010. "Employment Dynamics of Married Women and the Role of Part-Time Work: Evidence from Korea," Working Papers 1003, Research Institute for Market Economy, Sogang University.
  4. 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, vol. 53(1), pages 25-38, June.
  5. 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, vol. 17(2), pages 323-335, April.
  6. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2014. "Time aggregation and state dependence in welfare receipt," Discussion Papers 771, Research Department of Statistics Norway.

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