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

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  • Lacroix, G.
  • Frechette, P.

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.
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Suggested Citation

  • Lacroix, G. & Frechette, P., 1992. "A Microeconomic Model of Female Labor Supply in the Presence of Unemployment and Underemployment," Papers 9210, Laval - Recherche en Politique Economique.
  • Handle: RePEc:fth:lavape:9210
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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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    Keywords

    labour market ; wages ; economic models;

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