IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/38038.html
   My bibliography  Save this paper

Modeling employment dynamics with state dependence and unobserved heterogeneity

Author

Listed:
  • Prowse, Victoria

Abstract

We extend existing work on the dynamics of labor force participation by distinguishing between full-time and part-time employment and by allowing unobserved heterogeneity in the effects of previous employment outcomes, children and education on labor supply behavior. In addition, unobserved heterogeneity may feature autocorrelation and correlated random effects. Our results reveal significant variation in the effects of children and education on labor supply behavior. Moreover, the omission of random coefficients and autocorrelation biases estimates of state dependencies. On average, temporary shocks that increase the rate of part-time employment lead subsequently to lower rates of non-employment than do shocks that temporarily increase the rate of full-time work.

Suggested Citation

  • Prowse, Victoria, 2012. "Modeling employment dynamics with state dependence and unobserved heterogeneity," MPRA Paper 38038, University Library of Munich, Germany, revised 10 Apr 2012.
    • Handle: RePEc:pra:mprapa:38038
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/38038/1/MPRA_paper_38038.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Alison L. Booth & Stephen P. Jenkins & Carlos Garcia Serrano, 1999. "New Men and New Women? A Comparison of Paid Work Propensities from a Panel Data Perspective," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(2), pages 167-197, May.
    3. Sara Connolly & Mary Gregory, 2008. "Moving Down: Women's Part‐Time Work and Occupational Change in Britain 1991–2001," Economic Journal, Royal Economic Society, vol. 118(526), pages 52-76, February.
    4. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
    5. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54, January.
    6. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-589, August.
    7. Kubin, Ingrid & Prinz, Aloys, 2002. "Labour supply with habit formation," Economics Letters, Elsevier, vol. 75(1), pages 75-79, March.
    8. John Fitzgerald & Peter Gottschalk & Robert Moffitt, 1998. "An Analysis of Sample Attrition in Panel Data: The Michigan Panel Study of Income Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 251-299.
    9. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," Department of Economics, Working Paper Series qt3tb6j874, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    10. van Soest, Arthur & Das, Marcel & Gong, Xiaodong, 2002. "A structural labour supply model with flexible preferences," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 345-374, March.
    11. Marco Francesconi, 2002. "A Joint Dynamic Model of Fertility and Work of Married Women," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 336-380, Part.
    12. Gianna Claudia Giannelli & Chiara Monfardini, 2003. "Joint decisions on household membership and human capital accumulation of youths. The role of expected earnings and local markets," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(2), pages 265-285, May.
    13. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
    14. Geweke, John, 1996. "Monte carlo simulation and numerical integration," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 15, pages 731-800, Elsevier.
    15. repec:bla:scandj:v:91:y:1989:i:2:p:371-96 is not listed on IDEAS
    16. repec:bla:econom:v:47:y:1980:i:187:p:247-83 is not listed on IDEAS
    17. Harris, Katherine M. & Keane, Michael P., 1998. "A model of health plan choice:: Inferring preferences and perceptions from a combination of revealed preference and attitudinal data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 131-157, November.
    18. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    19. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
    20. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, May.
    21. Prowse, Victoria L., 2005. "State Dependence in a Multi-State Model of Employment Dynamics," IZA Discussion Papers 1623, Institute of Labor Economics (IZA).
    22. Alan Manning & Barbara Petrongolo, 2008. "The Part-Time Pay Penalty for Women in Britain," Economic Journal, Royal Economic Society, vol. 118(526), pages 28-51, February.
    23. Bolduc, Denis, 1992. "Generalized autoregressive errors in the multinomial probit model," Transportation Research Part B: Methodological, Elsevier, vol. 26(2), pages 155-170, April.
    24. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    25. Bingley, Paul & Walker, Ian, 1997. "The Labour Supply, Unemployment and Participation of Lone Mothers in In-Work Transfer Programmes," Economic Journal, Royal Economic Society, vol. 107(444), pages 1375-1390, September.
    26. Hausman, Jerry A & Wise, David A, 1978. "A Conditional Probit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Econometrica, Econometric Society, vol. 46(2), pages 403-426, March.
    27. Diane M. Dancer & Denzil G. Fiebig, 2004. "Modelling Students at Risk," Australian Economic Papers, Wiley Blackwell, vol. 43(2), pages 158-173, June.
    28. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
    29. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    30. Alan Manning & Barbara Petrongolo, 2005. "The Part-Time Pay Penalty," CEP Discussion Papers dp0679, Centre for Economic Performance, LSE.
    31. Rust, John, 1996. "Numerical dynamic programming in economics," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 14, pages 619-729, Elsevier.
    32. Woittiez, Isolde & Kapteyn, Arie, 1998. "Social interactions and habit formation in a model of female labour supply," Journal of Public Economics, Elsevier, vol. 70(2), pages 185-205, November.
    33. Shaw, Kathryn L, 1989. "Life-Cycle Labor Supply with Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 431-456, May.
    34. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
    35. Geweke, John F. & Keane, Michael P. & Runkle, David E., 1997. "Statistical inference in the multinomial multiperiod probit model," Journal of Econometrics, Elsevier, vol. 80(1), pages 125-165, September.
    36. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-560, June.
    37. Jacqueline O'Reilly & Silke Bothfeld, 2002. "What happens after working part time? Integration, maintenance or exclusionary transitions in Britain and western Germany," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 26(4), pages 409-439, July.
    38. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
    39. Bunch, David S., 1991. "Estimability in the multinomial probit model," Transportation Research Part B: Methodological, Elsevier, vol. 25(1), pages 1-12, February.
    40. Sumru Altuğ & Robert A. Miller, 1998. "The Effect of Work Experience on Female Wages and Labour Supply," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(1), pages 45-85.
    41. Dansie, B. R., 1985. "Parameter estimability in the multinomial probit model," Transportation Research Part B: Methodological, Elsevier, vol. 19(6), pages 526-528, December.
    42. Keane, Michael P, 1997. "Modeling Heterogeneity and State Dependence in Consumer Choice Behavior," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 310-327, July.
    43. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-1395, November.
    44. Kenneth Train ., 2000. "Halton Sequences for Mixed Logit," Economics Working Papers E00-278, University of California at Berkeley.
    45. Bound, John & Schoenbaum, Michael & Stinebrickner, Todd R. & Waidmann, Timothy, 1999. "The dynamic effects of health on the labor force transitions of older workers," Labour Economics, Elsevier, vol. 6(2), pages 179-202, June.
    46. Bunch, David S., 1991. "Estimability in the Multinomial Probit Model," University of California Transportation Center, Working Papers qt1gf1t128, University of California Transportation Center.
    47. Bhat, Chandra R., 2001. "Quasi-random maximum simulated likelihood estimation of the mixed multinomial logit model," Transportation Research Part B: Methodological, Elsevier, vol. 35(7), pages 677-693, August.
    48. Heckman, James J & Willis, Robert J, 1977. "A Beta-logistic Model for the Analysis of Sequential Labor Force Participation by Married Women," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 27-58, February.
    49. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
    50. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1.
    51. Duncan, Alan & Giles, Christopher, 1996. "Labour Supply Incentives and Recent Family Credit Reforms," Economic Journal, Royal Economic Society, vol. 106(434), pages 142-155, January.
    52. Bhat, Chandra R., 1998. "Accommodating variations in responsiveness to level-of-service measures in travel mode choice modeling," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(7), pages 495-507, September.
    53. Bunch, David S. & Kitamura, Ryuichi, 1991. "Probit Model Estimation Revisited: Trinomial Models of Household Car Ownership," University of California Transportation Center, Working Papers qt2hr8d4bs, University of California Transportation Center.
    54. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
    55. Hausman, Jerry A & Wise, David A, 1979. "Attrition Bias in Experimental and Panel Data: The Gary Income Maintenance Experiment," Econometrica, Econometric Society, vol. 47(2), pages 455-473, March.
    56. Keane, Michael, 1993. "Simulation estimation for panel data models with limited dependent variables," MPRA Paper 53029, University Library of Munich, Germany.
    57. Ben-Akiva, M. & Bolduc, D. & Bradley, M., 1993. "Estimation of Travel Choice Models with Randomly Distributed Values of Time," Papers 9303, Laval - Recherche en Energie.
    58. repec:bla:obuest:v:61:y:1999:i:2:p:167-97 is not listed on IDEAS
    59. Bover, Olympia, 1991. "Relaxing Intertemporal Separability: A Rational Habits Model of Labor Supply Estimated from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 85-100, January.
    60. Victoria Prowse, 2005. "State Dependence in a Multi-state Model of Employment," Economics Papers 2005-W20, Economics Group, Nuffield College, University of Oxford.
    61. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    62. Chris Forman, 2005. "The Corporate Digital Divide: Determinants of Internet Adoption," Management Science, INFORMS, vol. 51(4), pages 641-654, April.
    63. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ziegler Andreas, 2010. "Z-Tests in Multinomial Probit Models under Simulated Maximum Likelihood Estimation: Some Small Sample Properties," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(5), pages 630-652, October.
    2. Keane, Michael P. & Todd, Petra E. & Wolpin, Kenneth I., 2011. "The Structural Estimation of Behavioral Models: Discrete Choice Dynamic Programming Methods and Applications," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 4, pages 331-461, Elsevier.
    3. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    4. Peter Haan & Arne Uhlendorff, 2013. "Intertemporal labor supply and involuntary unemployment," Empirical Economics, Springer, vol. 44(2), pages 661-683, April.
    5. Michael P. Keane, 2013. "Panel data discrete choice models of consumer demand," Economics Papers 2013-W08, Economics Group, Nuffield College, University of Oxford.
    6. Geweke, J. & Joel Horowitz & Pesaran, M.H., 2006. "Econometrics: A Bird’s Eye View," Cambridge Working Papers in Economics 0655, Faculty of Economics, University of Cambridge.
    7. Peter Haan, 2005. "State Dependence and Female Labor Supply in Germany: The Extensive and the Intensive Margin," Discussion Papers of DIW Berlin 538, DIW Berlin, German Institute for Economic Research.
    8. Prowse, Victoria L., 2006. "Part-time Work and Occupational Attainment Amongst a Cohort of British Women," IZA Discussion Papers 2342, Institute of Labor Economics (IZA).
    9. Kurowska, Anna & Myck, Michal & Wrohlich, Katharina, 2012. "Family and Labor Market Choices: Requirements to Guide Effective Evidence-Based Policy," IZA Discussion Papers 6846, Institute of Labor Economics (IZA).
    10. Liesenfeld, Roman & Richard, Jean-François, 2010. "Efficient estimation of probit models with correlated errors," Journal of Econometrics, Elsevier, vol. 156(2), pages 367-376, June.
    11. Karthik K. Srinivasan & Hani S. Mahmassani, 2005. "A Dynamic Kernel Logit Model for the Analysis of Longitudinal Discrete Choice Data: Properties and Computational Assessment," Transportation Science, INFORMS, vol. 39(2), pages 160-181, May.
    12. Aguirregabiria, Victor & Mira, Pedro, 2010. "Dynamic discrete choice structural models: A survey," Journal of Econometrics, Elsevier, vol. 156(1), pages 38-67, May.
    13. Rennings, Klaus & Ziegler, Andreas & Zwick, Thomas, 2001. "Employment changes in environmentally innovative firms," ZEW Discussion Papers 01-46, ZEW - Leibniz Centre for European Economic Research.
    14. Sebastian Galiani & Juan Pantano, 2021. "Structural Models: Inception and Frontier," NBER Working Papers 28698, National Bureau of Economic Research, Inc.
    15. Geyer, Johannes & Steiner, Viktor, 2007. "Short-Run and Long-Term Effects of Childbirth on Mothers’ Employment and Working Hours Across Institutional Regimes: An Empirical Analysis Based on the European Community Household Panel," IZA Discussion Papers 2693, Institute of Labor Economics (IZA).
    16. Nisar Ahmad, 2014. "State Dependence in Unemployment," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 93-106.
    17. Daziano, Ricardo A. & Achtnicht, Martin, 2012. "Forecasting adoption of ultra-low-emission vehicles using the GHK simulator and Bayes estimates of a multinomial probit model," ZEW Discussion Papers 12-017, ZEW - Leibniz Centre for European Economic Research.
    18. William Greene, 2001. "Fixed and Random Effects in Nonlinear Models," Working Papers 01-01, New York University, Leonard N. Stern School of Business, Department of Economics.
    19. Paleti, Rajesh, 2018. "Generalized multinomial probit Model: Accommodating constrained random parameters," Transportation Research Part B: Methodological, Elsevier, vol. 118(C), pages 248-262.
    20. Troske, Kenneth R. & Voicu, Alexandru, 2010. "Joint estimation of sequential labor force participation and fertility decisions using Markov chain Monte Carlo techniques," Labour Economics, Elsevier, vol. 17(1), pages 150-169, January.

    More about this item

    Keywords

    Discrete Labor Supply; Repeated Multinomial Choice; Maximum Simulated Likelihood Estimation;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38038. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.