Labor Supply as a Choice among Latent Job Opportunities. A Practical Empirical Approach
AbstractIn this paper, we discuss aspects of a particular framework for modeling labor supply and the application of this approach in practical policy simulation experiments. This modeling framework differs from the standard models of labor supply in that the notion of job choice is fundamental. Specifically, the worker is assumed to have preferences over a latent worker-specific choice set of jobs from which he or she chooses his or her preferred job. A job is characterized with fixed (job-specific) working hours and other non-pecuniary attributes. As a result, observed hours of work are interpreted as the job-specific (fixed) hours of work that is associated with the chosen job. We then show that our framework is practical with respect to applications in empirical analysis and simulation experiments, and is able to produce satisfactory out-of-sample predictions by estimating the model on Norwegian microdata from 1997 and predicting the corresponding microdata from 2003.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 481.
Date of creation: Oct 2006
Date of revision:
Labor supply; non-pecuniary job attributes; non-convex budget sets; latent choice sets; random utility models.;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-DCM-2007-01-13 (Discrete Choice Models)
- NEP-LAB-2007-01-13 (Labour Economics)
- NEP-UPT-2007-01-13 (Utility Models & Prospect Theory)
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