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Parameters Heterogeneity in a Model of Labour Supply: Exploring the Performance of Mixed Logit

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  • Ugo Colombino
  • Marilena Locatelli

Abstract

In this note we investigate the empirical differences between the Random Utility model with fixed coefficients (Conditional Logit), and the Random Utility model with random coefficients (Mixed Logit). We consider a model of household labour supply developed for a project aimed at the evaluation of alternative Basic Income mechanisms. Data are drawn from the 1998 Bank of Italy survey of household income and wealth (SHIW 1998) and choice alternatives are generated using EUROMOD. We compare the estimates of the Conditional Logit and Mixed Logit. We also compare the respective results from simulating the effects of a Flat Tax reform. Although on average the estimates of Conditional Logit and of Mixed Logit are very close, the Mixed Logit estimates reveal that there is a significant unobserved heterogeneity of preferences. We also compare the simulations of a hypothetical Flat Tax reform. Although the differences are small, yet the results would imply different policy conclusions depending on whether Conditional Logit or Mixed Logit is adopted.

Suggested Citation

  • Ugo Colombino & Marilena Locatelli, 2008. "Parameters Heterogeneity in a Model of Labour Supply: Exploring the Performance of Mixed Logit," CHILD Working Papers wp21_08, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    • Handle: RePEc:wpc:wplist:wp21_08
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    File URL: http://www.child.carloalberto.org/images/wp/child21_2008.pdf
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    References listed on IDEAS

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    2. O'Donoghue, Cathal & Colombino, Ugo & Narazani, Edlira & Locatelli, Marilena & Shima, Isilda, 2008. "Behavioural and welfare effects of basic income policies: a simulation for European countries," EUROMOD Working Papers EM5/08, EUROMOD at the Institute for Social and Economic Research.
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    More about this item

    Keywords

    labour supply; conditional logit; mixed logit; unobserved heterogeneity;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • J0 - Labor and Demographic Economics - - General

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