Structural Models of Family Labor Supply: A Discrete Choice Approach
A static neoclassical structural model is presented, explaining labor supply of both spouses in two adults households. Family preferences are described with a direct translog utility function, with the husband's leisure, the wife's leisure, and family income as its arguments. We assume that the choice set of each family is finite. Account is taken of the Dutch tax and benefits system. We allow for hours restrictions and random preferences, and account for unobserved wages of nonworkers. The models are estimated using smooth simulated maximum likelihood. Results based upon Dutch cross-section data from 1987 are illustrated by confidence intervals for elasticities, and by several policy simulations.
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