Evaluating Alternative Representations of the Choice Sets in Models of Labour Supply
During the last two decades, the discrete-choice modelling of labour supply decisions has become increasingly popular, starting with Aaberge et al. (1995) and van Soest (1995). Within the literature adopting this approach there are however two potentially important issues t hat so far have not been given the attention they might deserve. A first issue concerns the procedure by which the discrete alternatives are selected to enter the choice set. For example van Soest (1995) chooses (non probabilistically) a set of fixed points identical for every individual. This is by far the most widely adopted method. By contrast, Aaberge et al. (1995) adopt a sampling procedure suggested by McFadden (1978) and also assume that the choice set may differ across the households. A second issue concerns the availability of the alternatives. Most authors assume all the values of hours-of-work within some range [0, H] are equally available. At the other extreme, some authors assume only two or three alternatives (e.g. non-participation, part-time and full-time) are available for everyone. Aaberge et al. (1995) assume instead that not all the hour opportunities are equally available to everyone; they specify a probability density function of opportunities for each individual and the discrete choice set used in the estimation is built by sampling from that individual -specific density function. In this paper we explore by simulation the implications of - the procedure used to build the choice set (fixed alternatives vs sampled alternatives) - accounting or not accounting for a different availability of alternatives. The results of the evaluation performed in this paper show that the way the choice set is represented have little impact on the fitting of observed values, but a more significant and important impact on the out-of-sample prediction performance.
|Date of creation:||Oct 2006|
|Contact details of provider:|| Postal: Via Po 53 10124 Turin|
Web page: http://www.carloalberto.org/child-collegiocarloalberto/
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.:
- 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.
- Mark N. Harris & Alan Duncan, 2002. "Intransigencies in the Labour Supply Choice," Melbourne Institute Working Paper Series wp2002n17, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- John Creedy & Guyonne Kalb, 2003.
"Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation,"
Treasury Working Paper Series
03/20, New Zealand Treasury.
- John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 697-734, December.
- John Creedy & Guyonne Kalb & Rosanna Scutella, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Melbourne Institute Working Paper Series wp2003n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Melbourne Institute Working Paper Series wp2003n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- A. Zabalza & C. Pissarides & M. Barton, 1980.
"Social security and the choice between full-time work, part-time work and retirement,"
in: Econometric Studies in Public Finance, pages 245-276
National Bureau of Economic Research, Inc.
- Zabalza, A. & Pissarides, C. & Barton, M., 1980. "Social security and the choice between full-time work, part-time work and retirement," Journal of Public Economics, Elsevier, vol. 14(2), pages 245-276, October.
- Blundell, Richard & Macurdy, Thomas, 1999.
"Labor supply: A review of alternative approaches,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695
- Rolf Aaberge & Ugo Colombino & Steinar Strøm, 2004.
"Do more equal slices shrink the cake? An empirical investigation of tax-transfer reform proposals in Italy,"
Journal of Population Economics,
Springer;European Society for Population Economics, vol. 17(4), pages 767-785, December.
- Aaberge, Rolf & Colombino, Ugo & Strøm, Steinar, 2003. "Do More Equal Slices Shrink the Cake? An Empirical Investigation of Tax-Transfer Reform Proposals in Italy," Memorandum 37/2003, Oslo University, Department of Economics.
- Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
- Rolf Aaberge & Ugo Colombino & Steinar Strøm & Tom Wennemo, 2005. "Joint Labour Supply of Married Couples: Efficiency and Distribution Effects of Tax and Labour Market Reforms," Labor and Demography 0501004, EconWPA.
- Tom Kornstad & Thor O. Thoresen, 1999.
"Means-testing the Child Benefit,"
262, Statistics Norway, Research Department.
- Moffitt, Robert, 1986. "The Econometrics of Piecewise-Linear Budget Constraints: A Survey and Exposition of the Maximum Likelihood Method," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(3), pages 317-328, July.
- Blomquist, N. Soren, 1988. "Nonlinear taxes and labor supply," European Economic Review, Elsevier, vol. 32(6), pages 1213-1226, July.
- Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September.
- 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.
- James J. Heckman, 1974.
"Effects of Child-Care Programs on Women's Work Effort,"
in: Marriage, Family, Human Capital, and Fertility, pages 136-169
National Bureau of Economic Research, Inc.
- Heckman, James J, 1974. "Effects of Child-Care Programs on Women's Work Effort," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S136-S163, Part II, .
- Tim R.L. Fry & Mark N. Harris, 2002. "The DOGEV Model," Monash Econometrics and Business Statistics Working Papers 7/02, Monash University, Department of Econometrics and Business Statistics.
- Ugo Colombino & Steinar Strøm & Rolf Aaberge, 2000. "Labor supply responses and welfare effects from replacing current tax rules by a flat tax: Empirical evidence from Italy, Norway and Sweden," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(4), pages 595-621.
- repec:hoo:wpaper:e-90-11 is not listed on IDEAS
- Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
- James J. Heckrnan, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 491-524 National Bureau of Economic Research, Inc.
- Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-422, July-Aug..
- Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-659, December.
- Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
- Duncan, Alan & Weeks, Melvyn, 1997. "Behavioural tax microsimulation with finite hours choices," European Economic Review, Elsevier, vol. 41(3-5), pages 619-626, April.
- Gaundry, Marc J. I. & Dagenais, Marcel G., 1979. "The dogit model," Transportation Research Part B: Methodological, Elsevier, vol. 13(2), pages 105-111, June.
When requesting a correction, please mention this item's handle: RePEc:wpc:wplist:wp17_06. 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: (Giovanni Bert)
If references are entirely missing, you can add them using this form.