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A Microeconomic Model of Female Labour Supply in the Presence of Unemployment and Underemployment

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  • Guy Lacroix
  • Pierre Frechette

Abstract

In this paper we model female labor supply within a discrete choice framework. Two different rationing mechanisms are incorporated into the model: involuntary unemployment and underemployment. The model is set-up as a generalization of the Double-Hurdle model of Cragg [1971]. Our estimation strategy consists in estimating the model first without taking into account the rationing mechanisms (Model 1). Next we introduce these mechanisms but do not use the information on sample separation (Model 2). Finally, the information is used and the likelihood altered accordingly (Model 3). It turns out the information on rationing makes a dramatic difference on the preference parameters and hence, on desired hours of work. This suggest that the labor supply models that incorporate unobserved constraints are potentially biasing the estimation of preference parameters. Our results show that the uncompensated wage and income elasticities are slightly overestimated in Model 1 and largely underestimated in Model 2 relative to Model 3.

Suggested Citation

  • Guy Lacroix & Pierre Frechette, 1994. "A Microeconomic Model of Female Labour Supply in the Presence of Unemployment and Underemployment," Annals of Economics and Statistics, GENES, issue 36, pages 113-131.
  • Handle: RePEc:adr:anecst:y:1994:i:36:p:113-131
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    Cited by:

    1. Kimhi, Ayal, 1996. "Household Demand for Tobacco: Identifying Reasons for Non-Purchases," Working Papers 232693, Hebrew University of Jerusalem, Center for Agricultural Economic Research.

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