IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Unemployment and Liquidity Constraints

  • Vassilis A. Hajivassiliou
  • Yannis M. Ioannides

    (Yale University)

We present a dynamic framework for the interaction between borrowing (liquidity) constraints and deviations of actual hours from desired hours, both measured by discrete-valued indicators, and estimate it as a system of dynamic binary and ordered probit models with panel data from the Panel Study of Income Dynamics. We analyze a household's propensity to be liquidity constrained by means of a dynamic binary probit model. We analyze qualitative aspects of the conditions of employment, namely whether the household head is involuntarily overemployed, voluntarily employed, or involuntarily underemployed or unemployed, by means of a dynamic ordered probit model. We focus on the possible interaction between the two types of constraints. We estimate these models jointly using maximum simulated likelihood, where we allow for individual random effects along with an autoregressive process for the general error term in each equation. A novel feature of our method is that it allows for the random effects to be correlated with regressors in a time-invariant fashion. Our results provide strong support for the basic theory of constrained behavior and the interaction between liquidity constraints and exogenous constraints on labor supply. Copyright © 2007 John Wiley & Sons, Ltd.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://ftp.econ.yale.edu/pub/vassilis/papers/ps/eulerdsc.zip
Our checks indicate that this address may not be valid because: 500 Failed to connect to FTP server ftp.econ.yale.edu: Net::FTP: Bad hostname 'ftp.econ.yale.edu'. If this is indeed the case, please notify (Thomas Krichel)


Download Restriction: no

Paper provided by Yale University in its series Working Papers with number _019.

as
in new window

Length:
Date of creation: Apr 1993
Date of revision:
Handle: RePEc:wop:yaluwp:_019
Contact details of provider: Postal: PO Box 8268, New Haven CT 06520-8268
Phone: (203) 432-3576
Fax: (203) 432-5779
Web page: http://www.econ.yale.edu/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March.
  2. Hotz, V Joseph & Kydland, Finn E & Sedlacek, Guilherme L, 1988. "Intertemporal Preferences and Labor Supply," Econometrica, Econometric Society, vol. 56(2), pages 335-60, March.
  3. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
  4. John C. Ham, 1980. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Working Papers 521, Princeton University, Department of Economics, Industrial Relations Section..
  5. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  6. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September.
  7. Ham, John C, 1986. "Testing Whether Unemployment Represents Intertemporal Labour Supply Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 559-78, August.
  8. Vassilis A. Hajivassiliou & Daniel L. McFadden & Paul Ruud, 1993. "Simulation of Multivariate Normal Rectangle Probabilities and their Derivatives: Theoretical and Computational Results," Working Papers _024, Yale University.
  9. Hotz, V Joseph & Miller, Robert A, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 497-529, July.
  10. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  11. Stephen Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 24-85, Wharton School Rodney L. White Center for Financial Research.
  12. 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.
  13. Clarida, Richard H, 1987. "Consumption, Liquidity Constraints and Asset Accumulation in the Presence of Random Income Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 339-51, June.
  14. V A Hajivassiliou & DL McFadden, 1997. "The Method of Simulated Scores for the Estimation of LDV Models," STICERD - Econometrics Paper Series /1997/328, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  15. Stephen Zeldes, . "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," Rodney L. White Center for Financial Research Working Papers 20-86, Wharton School Rodney L. White Center for Financial Research.
  16. Hajivassiliou, Vassilis A. & Ioannides, Yannis M., 1996. "Duality and liquidity constraints under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1177-1192.
  17. MaCurdy, Thomas E, 1983. "A Simple Scheme for Estimating an Intertemporal Model of Labor Supply and Consumption in the Presence of Taxes and Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(2), pages 265-89, June.
  18. Ball, Laurence, 1990. "Intertemporal Substitution and Constraints on Labor Supply: Evidence from Panel Data," Economic Inquiry, Western Economic Association International, vol. 28(4), pages 706-24, October.
  19. Taylor, John B & Uhlig, Harald, 1990. "Solving Nonlinear Stochastic Growth Models: A Comparison of Alternative Solution Methods," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 1-17, January.
  20. Ashenfelter, Orley, 1980. "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply," Econometrica, Econometric Society, vol. 48(3), pages 547-64, April.
  21. Thierry Magnac & David Thesmar, 2002. "Identifying Dynamic Discrete Decision Processes," Econometrica, Econometric Society, vol. 70(2), pages 801-816, March.
  22. Deaton, Angus & Meullbauer, John, 1981. "Functional Forms for Labor Supply and Commodity Demands with and without Quantity Restrictions," Econometrica, Econometric Society, vol. 49(6), pages 1521-32, November.
  23. John C. Ham & Kevin T. Reilly, 2002. "Testing Intertemporal Substitution, Implicit Contracts, and Hours Restriction Models of the Labor Market Using Micro Data," American Economic Review, American Economic Association, vol. 92(4), pages 905-927, September.
  24. Alessie, Rob & Melenberg, Bertrand & Weber, Guglielmo, 1988. "Consumption, leisure and earnings-related liquidity constraints : A note," Economics Letters, Elsevier, vol. 27(1), pages 101-104.
  25. Borsch-Supan, Axel & Hajivassiliou, Vassilis A., 1993. "Smooth unbiased multivariate probability simulators for maximum likelihood estimation of limited dependent variable models," Journal of Econometrics, Elsevier, vol. 58(3), pages 347-368, August.
  26. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June.
  27. Biddle, Jeff E, 1988. "Intertemporal Substitution and Hours Restrictions," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 347-51, May.
  28. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
  29. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May.
  30. Marjorie Flavin, 1985. "Excess Sensitivity of Consumption to Current Income: Liquidity Constraints or Myopia?," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 117-36, February.
  31. Lee, Lung-Fei & Porter, Robert H, 1984. "Switching Regression Models with Imperfect Sample Separation Information-With an Application on Cartel Stability," Econometrica, Econometric Society, vol. 52(2), pages 391-418, March.
  32. Altonji, Joseph G & Siow, Aloysius, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 293-328, May.
  33. Blundell, Richard & Walker, Ian, 1986. "A Life-Cycle Consistent Empirical Model of Family Labour Supply Using Cross-Section Data," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 539-58, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wop:yaluwp:_019. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.