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Sectoral Labor Supply, Choice Restrictions and Functional Form

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Author Info
John K. Dagsvik and Steinar Strøm () (Statistics Norway)

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Abstract

In this paper we discuss a general framework for analyzing labor supply behavior in the presence of complicated budget- and quantity constraints of which some are unobserved. The individual’s labor supply decision is viewed as a choice from a set of discrete alternatives (jobs). These jobs are characterized by attributes such as hours of work, sector specific wages and other sector specific aspects of the jobs. We focus in particular on the theoretical justification of functional form assumptions and properties of the random components of the model. The labor supply model for married women is estimated on Norwegian data. Wage elasticities and the outcome of a tax reform analysis show that overall labor supply is moderately elastic, but these modest overall responses shadow for much stronger inter-sectoral changes. Our structural model, with a detailed specification of job opportunities, is compared empirically with a model in which the utility is approximated with a series expansion. It turns out that the performance of our model is at least as good as the labor supply model with flexible preferences.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 388.

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Date of creation: Sep 2004
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Handle: RePEc:ssb:dispap:388

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Related research
Keywords: Labor supply; non-convex budget sets; non-pecuniary job-attributes; sector-specific wages.;

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

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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.:
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    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. John K. Dagsvik, Marilena Locatelli and Steinar Strøm, 2006. "Simulating labor supply behavior when workers have preferences for job opportunities and face nonlinear budget constraints," Discussion Papers 488, Research Department of Statistics Norway. [Downloadable!]
    Other versions:
  2. Dagsvik, John K., 2006. "Justifying Functional Forms in Models for Transitions between Discrete States, with Particular Reference to Employment-Unemployment Dynamics," Memorandum 06/2006, Oslo University, Department of Economics. [Downloadable!]
  3. Jørgensen, Øystein & Ognedal, Tone & Strøm, Steinar, 2005. "Labor supply when tax evasion is an option," Memorandum 06/2005, Oslo University, Department of Economics. [Downloadable!]
  4. Maria Laura Di Tommaso & S. Strøm & E. M. Sæther, 2007. "Nurses Wanted. Is the job too harsh or is the wage too low?," CHILD Working Papers wp11_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
    Other versions:
  5. Zhiyang Jia, 2005. "Labor Supply of Retiring Couples and Heterogeneity in Household Decision-Making Structure," Discussion Papers 404, Research Department of Statistics Norway. [Downloadable!]
    Other versions:
  6. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics. [Downloadable!]
  7. Hernæs, Erik & Iskhakov, Fedor & Strøm, Steinar, 2006. "Early Retirement and Company Characteristics," Memorandum 16/2006, Oslo University, Department of Economics. [Downloadable!]
  8. John K. Dagsvik and Zhiyang Jia, 2008. "An Alternative Approach to Labor Supply Modeling. Emphasizing Job-type as Choice Variable," Discussion Papers 550, Research Department of Statistics Norway. [Downloadable!]
  9. Thor O. Thoresen, Jørgen Aasness and Zhiyang Jia, 2008. "More realistic estimates of revenue changes from tax cuts," Discussion Papers 545, Research Department of Statistics Norway. [Downloadable!]
  10. Tom Kornstad & Thor Thoresen, 2007. "A discrete choice model for labor supply and childcare," Journal of Population Economics, Springer, vol. 20(4), pages 781-803, October. [Downloadable!] (restricted)
  11. John K. Dagsvik and Zhiyang Jia, 2006. "Labor Supply as a Choice among Latent Job Opportunities. A Practical Empirical Approach," Discussion Papers 481, Research Department of Statistics Norway. [Downloadable!]
  12. Dagsvik John. K. & Locatelli Marilena & Strom Steinar, 2007. "Evaluation of tax reforms when workers have preferences over job attributes and face latent choice restrictions," Department of Economics Working Papers 200706, University of Turin. [Downloadable!]
    Other versions:
  13. John K. Dagsvik & Marilena Locatelli & Steinar Strøm, 2006. "Simulating labor supply behaviour when workers have preferences over job opportunities and face non-linear budget constraints," CHILD Working Papers wp01_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
  14. d'Haultfoeuille, Xavier & Maurel, Arnaud, 2009. "Another Look at the Identification at Infinity of Sample Selection Models," IZA Discussion Papers 4334, Institute for the Study of Labor (IZA). [Downloadable!]
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