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Labor Supply as a Choice among Latent Job Opportunities. A Practical Empirical Approach

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  • John K. Dagsvik
  • Zhiyang Jia

    ()
    (Statistics Norway)

Abstract

In 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 Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 481.

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Date of creation: Oct 2006
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Handle: RePEc:ssb:dispap:481

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Related research

Keywords: Labor supply; non-pecuniary job attributes; non-convex budget sets; latent choice sets; random utility models.;

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References

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  1. Dagsvik, John K. & Strom, Steinar & Jia, Zhiyang, 2006. "Utility of income as a random function: Behavioral characterization and empirical evidence," Mathematical Social Sciences, Elsevier, vol. 51(1), pages 23-57, January.
  2. Ted Bergstrom, 1994. "A Survey of Theories of the Family," Labor and Demography 9401001, EconWPA, revised 10 Oct 1994.
  3. Kapteyn, A.J. & Kooreman, P. & Soest, A.H.O. van, 1989. "Quantity rationing and concavity in a flexible household labor supply model," Discussion Paper 1989-16, Tilburg University, Center for Economic Research.
  4. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  5. John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Treasury Working Paper Series 03/20, New Zealand Treasury.
  6. Jerry A. Hausman & Paul Ruud, 1984. "Family Labor Supply With Taxes," NBER Working Papers 1271, National Bureau of Economic Research, Inc.
  7. Jørgen Aasness & Torstein Bye & Hans Terje Mysen, 1995. "Welfare Effects of Emission Taxes in Norway," Discussion Papers 148, Research Department of Statistics Norway.
  8. Ilmakunnas, Seija & Pudney, Stephen, 1990. "A model of female labour supply in the presence of hours restrictions," Journal of Public Economics, Elsevier, vol. 41(2), pages 183-210, March.
  9. Dagsvik, John K. & Strøm, Steinar, 2004. "Sectoral labor supply, choice restrictions and functional form," Memorandum 13/2004, Oslo University, Department of Economics.
  10. 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.
  11. William T. Dickens & Shelly J. Lundberg, 1985. "Hours Restrictions and Labor Supply," NBER Working Papers 1638, National Bureau of Economic Research, Inc.
  12. John K. Dagsvik, 1996. "Aggregation in Matching Markets," Discussion Papers 173, Research Department of Statistics Norway.
  13. Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September.
  14. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  15. McFadden, Daniel L., 1984. "Econometric analysis of qualitative response models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 24, pages 1395-1457 Elsevier.
  16. Zhiyang Jia, 2005. "Labor Supply of Retiring Couples and Heterogeneity in Household Decision-Making Structure," Discussion Papers 404, Research Department of Statistics Norway.
  17. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
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Citations

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Cited by:
  1. John Dagsvik & Zhiyang Jia & Kristian Orsini & Guy Camp, 2011. "Subsidies on low-skilled workers’ social security contributions: the case of Belgium," Empirical Economics, Springer, vol. 40(3), pages 779-806, May.
  2. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
  3. Thor O. Thoresen & Jørgen Aasness & Zhiyang Jia, 2008. "More realistic estimates of revenue changes from tax cuts," Discussion Papers 545, Research Department of Statistics Norway.
  4. John K. Dagsvik & Zhiyang Jia, 2008. "An Alternative Approach to Labor Supply Modeling. Emphasizing Job-type as Choice Variable," Discussion Papers 550, Research Department of Statistics Norway.

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