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Sectoral labor supply, choice restrictions and functional form

  • Dagsvik, John K.

    ()

    (Statistics Norway)

  • Strøm, Steinar

    ()

    (Dept. of Economics, University of Oslo)

In this paper we discuss a general framework for analyzing labor supply behavior in the presence of complicated budget- and quantity constraints of which some are unobserved. The individual’s labor supply decision is viewed as a choice from a set of discrete alternatives (jobs). These jobs are characterized by attributes such as hours of work, sector specific wages and other sector specific aspects of the jobs. We focus in particular on the theoretical justification of functional form assumptions and properties of the random components of the model.The labor supply model for married women is estimated on Norwegian data. Wage elasticities and the outcome of a tax reform analysis show that overall labor supply is moderately elastic, but these modest overall responses shadow for much stronger inter-sectoral changes. Our structural model, with a detailed specification of job opportunities, is compared empirically with a model in which the utility is approximated with a series expansion. It turns out that the performance of our model is at least as good as the labor supply model with flexible preferences.

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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2004/Memo-13-2004.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 13/2004.

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Length: 60 pages
Date of creation: 27 Oct 2004
Date of revision:
Handle: RePEc:hhs:osloec:2004_013
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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