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Family Structure and Female Labor Supply in Mexico City

  • Xiaodong Gong
  • Arthur van Soest

We investigate labor supply of married women in Mexico City, using a static neoclassical structural model. By choosing her labor supply and corresponding income, each woman is assumed to maximize a direct translog utility function with family composition variables as taste shifters. We account for random preferences, their correlation with wage equation errors, and fixed costs of working. The wage equation and the labor supply model are estimated jointly by smooth simulated maximum likelihood. We find income elasticities of labor supply of about -0.17, and wage elasticities of about 0.87. The latter are underestimated if we ignore the correlation between wage equation errors and random preferences.

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Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 37 (2002)
Issue (Month): 1 ()
Pages: 163-191

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Handle: RePEc:uwp:jhriss:v:37:y:2002:i:1:p:163-191
Contact details of provider: Web page: http://jhr.uwpress.org/

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  1. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier.
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  3. Lee, L-F., 1990. "On Efficiency of Methods of Simulated Moments and Maximum Simulated Likelihood Estimation of Discrete Response Models," Papers 260, Minnesota - Center for Economic Research.
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