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The estimation of utility-consistent labor supply models by means of simulated scores

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  • Hans G. Bloemen

    (Department of Economics, Free University Amsterdam, Amsterdam, The Netherlands)

  • Arie Kapteyn

    (Rand Corporation, Santa Monica (California), USA)

Abstract

We consider a utility-consistent static labor supply model with flexible preferences and a nonlinear and possibly non-convex budget set. Stochastic error terms are introduced to represent optimization and reporting errors, stochastic preferences, and heterogeneity in wages. Coherency conditions on the parameters and the support of error distributions are imposed for all observations. The complexity of the model makes it impossible to write down the probability of participation. Hence we use simulation techniques in the estimation. We compare our approach with various simpler alternatives proposed in the literature. Both in Monte Carlo experiments and for real data the various estimation methods yield very different results. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Hans G. Bloemen & Arie Kapteyn, 2008. "The estimation of utility-consistent labor supply models by means of simulated scores," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(4), pages 395-422.
  • Handle: RePEc:jae:japmet:v:23:y:2008:i:4:p:395-422
    DOI: 10.1002/jae.1010
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    References listed on IDEAS

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    1. repec:eme:ceapzz:s0573-855520140000293006 is not listed on IDEAS
    2. Nicole Bosch & Miriam Gielen & Egbert Jongen & Mauro Mastrogiacomo (DNB & voorheen CPB), 2013. "A structural analysis of labour supply elasticities in the Netherlands," CPB Discussion Paper 235, CPB Netherlands Bureau for Economic Policy Analysis.
    3. John K. Dagsvik & Zhiyang Jia, 2016. "Labor Supply as a Choice Among Latent Jobs: Unobserved Heterogeneity and Identification," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(3), pages 487-506, April.
    4. Bloemen, Hans G., 1997. "Job search theory, labour supply and unemployment duration," Journal of Econometrics, Elsevier, vol. 79(2), pages 305-325, August.
    5. Löffler, Max & Peichl, Andreas & Siegloch, Sebastian, 2013. "Validating Structural Labor Supply Models," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79819, Verein für Socialpolitik / German Economic Association.
    6. Loeffler, Max & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian & Sommer, Eric, 2014. "Documentation IZA?MOD v3.0: The IZA Policy Simulation Model," IZA Discussion Papers 8553, Institute for the Study of Labor (IZA).
    7. John K. Dagsvik & Steinar Strøm, 2017. "Labor supply analysis with non-convex budget sets without the Hausman approach," Discussion Papers 857, Statistics Norway, Research Department.
    8. Thoresen, Thor O. & Vattø, Trine E., 2015. "Validation of the discrete choice labor supply model by methods of the new tax responsiveness literature," Labour Economics, Elsevier, vol. 37(C), pages 38-53.
    9. Lanot, Gauthier, 2016. "The Marginal Rate of Substitution and the Specification of Labour Supply Models," Umeå Economic Studies 922, Umeå University, Department of Economics.
    10. Bloemen, Hans, 2010. "Income Taxation in an Empirical Collective Household Labour Supply Model with Discrete Hours," IZA Discussion Papers 4697, Institute for the Study of Labor (IZA).
    11. John K. Dagsvik & Zhiyang Jia & Tom Kornstad & Thor O. Thoresen, 2014. "Theoretical And Practical Arguments For Modeling Labor Supply As A Choice Among Latent Jobs," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 134-151, February.
    12. Hans Bloemen, 2015. "Collective Labour Supply, Taxes, and Intrahousehold Allocation: An Empirical Approach," Tinbergen Institute Discussion Papers 15-121/V, Tinbergen Institute.
    13. Shun-ichiro Bessho & Masayoshi Hayashi, 2013. "Estimating the Social Marginal Cost of Public Funds," Public Finance Review, , vol. 41(3), pages 360-385, May.
    14. Berger, Frederic & Islam, Nizamul & Liégeois, Philippe, 2010. "Discrete choice modelling of labour supply in Luxembourg through EUROMOD microsimulation," EUROMOD Working Papers EM5/10, EUROMOD at the Institute for Social and Economic Research.
    15. John K. Dagsvik & Zhiyang Jia, 2014. "Labor supply as a discrete choice among latent jobs: Unobserved heterogeneity and identification," Discussion Papers 786, Statistics Norway, Research Department.
    16. John K. Dagsvik & Zhiyang Jia, 2012. "Labor supply as a discrete choice among latent jobs," Discussion Papers 709, Statistics Norway, Research Department.
    17. Thor O. Thoresen & Trine E. Vattø, 2013. "Validation of structural labor supply model by the elasticity of taxable income," Discussion Papers 738, Statistics Norway, Research Department.
    18. 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.
    19. John K. Dagsvik & Zhiyang Jia, 2008. "An Alternative Approach to Labor Supply Modeling. Emphasizing Job-type as Choice Variable," Discussion Papers 550, Statistics Norway, Research Department.
    20. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis,in: Handbook of Microsimulation Modelling, volume 127, pages 167-221 Emerald Publishing Ltd.

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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