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Sectoral Labor Supply, Choice Restrictions and Functional Form
By Dagsvik, J.K. and S. Strøm
2006
Journal of Applied Econometrics, Vol 21, No 6, 803-826
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Abstract |
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. |
| JEL Classification:
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J22, C51 |
| Keywords:
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Labor supply, non-convex budget sets, non-pecuniary job-attributes, sector-specific wages. |
| Project:
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1143 Evaluation of tax reforms 1992, labor supply effects
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