The Hausman-MaCurdy Controversy - Why do results differ between studies?
The two perhaps most influential empirical labor supply studies carried out in the U.S. in recent years, Hausman (1981) and MaCurdy, Green & Paarsch (1990), report sharply contradicting labor supply estimates. In this paper we seek to uncover the driving forces behind the seemingly irreconcilable results. Our findings suggest that differences with respect to the estimated income and wage effects can be attributed to the use of differing nonlabor income and wage measures, respectively, in the two studies. Monte Carlo experiments suggest that the wage measure adopted by MaCurdy et al might cause a severely downward biased wage effect such that data falsely refute the basic notion of utility maximization.
|Date of creation:||04 Dec 1997|
|Date of revision:|
|Publication status:||Published in Journal of Human Resources, 2000, pages 204-220.|
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- Blomquist, N.S., 1992. "Estimation Methods for Male Labor Supply Functions: How to take Account to Taxes," Papers 1992-7, Uppsala - Working Paper Series.
- Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
- Aaron, Henry J., 2001. "Handbook of Health Economics," Journal of Health Economics, Elsevier, vol. 20(5), pages 847-854, September.
- Jerry A. Hausman, 1983.
"Taxes and Labor Supply,"
NBER Working Papers
1102, National Bureau of Economic Research, Inc.
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