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A Monte Carlo evaluation of discrete choice labour supply models

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  • Lennart Flood
  • Nizamul Islam

Abstract

This paper is based on a Monte Carlo simulation in order to evaluate the properties of the discrete labour supply model. The data is generated by a continuous model and a discrete choice model is estimated assuming a translog utility function. The robustness of the results for different number of points in the discrete choice set, as well as for measurement errors in income and hours are compared. The discrete model produces similar results as the 'true' continuous model and apart from large measurement errors in hours these results are robust.

Suggested Citation

  • Lennart Flood & Nizamul Islam, 2005. "A Monte Carlo evaluation of discrete choice labour supply models," Applied Economics Letters, Taylor & Francis Journals, vol. 12(5), pages 263-266.
    • Handle: RePEc:taf:apeclt:v:12:y:2005:i:5:p:263-266
    DOI: 10.1080/13504850500042488
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    Cited by:

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    2. 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.
    3. Jorgen Hansen & Xingfei Liu, 2015. "Estimating labour supply responses and welfare participation: Using a natural experiment to validate a structural labour supply model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(5), pages 1831-1854, December.
    4. Löffler, Max & Peichl, Andreas & Siegloch, Sebastian, 2013. "Validating Structural Labor Supply Models," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79819, Verein für Socialpolitik / German Economic Association.
    5. Bessho, Shun-ichiro & Hayashi, Masayoshi, 2014. "Intensive margins, extensive margins, and spousal allowances in the Japanese system of personal income taxes: A discrete choice analysis," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 162-178.
    6. Löffler, 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 of Labor Economics (IZA).
    7. Bargain, Olivier & Peichl, Andreas, 2013. "Steady-state labor supply elasticities: A survey," ZEW Discussion Papers 13-084, ZEW - Leibniz Centre for European Economic Research.
    8. Brink, Anna & Nordblom, Katarina & Wahlberg, Roger, 2007. "Maximum fee vs child benefit: A welfare analysis of Swedish child-care fee reform," Working Papers in Economics 250, University of Gothenburg, Department of Economics.
    9. Pacifico, Daniele, 2009. "Modelling Unobserved Heterogeneity in Discrete Choice Models of Labour Supply," MPRA Paper 19030, University Library of Munich, Germany.
    10. Shun-ichiro Bessho & Masayoshi Hayashi, 2013. "Estimating the Social Marginal Cost of Public Funds," Public Finance Review, , vol. 41(3), pages 360-385, May.
    11. 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.
    12. Maximilian Joseph Blömer & Andreas Peichl, 2020. "The ifo Tax and Transfer Behavioral Microsimulation Model," ifo Working Paper Series 335, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    13. Anna Brink & Katarina Nordblom & Roger Wahlberg, 2007. "Maximum fee versus child benefit: a welfare analysis of Swedish child-care fee reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 457-480, August.

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