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Part II Second-Generation Studies of Labor SupplyPowerPoint Presentation

Part II Second-Generation Studies of Labor Supply

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Part II Second-Generation Studies of Labor Supply

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- 1) Introduction
- 2) Wage equation
- 3) Analysis of labor force participation decision
- 4) Comparing conditional OLS and Tobit estimates of labor supply
- 5) Heckman two-stage method

- Major shortcoming of first-generation studies of labor supply: neglecting the selectivity bias (focus on working cohort only)
- Data: US, 1975, women

- WHRS…...labor supply….. hours worked per year in 1975
- WA………..age
- WE………...education in years
- WW………..wage………….hourly wage rate
- KL6………number of children less than 6 years old
- K618 ……..number of children more than 6 years old and less than 18 years old
- LWW = ln(WW)
- LWHRS = ln(WHRS)
- WA2=(WA^2)/100
- AX……….labor market experience in years
- CIT……….dummy variable, =1 if live in large city

3) Analysis of labor force participation decision: PROBITMarginal effects = change in probability to work due to a marginal increase in explanatory variables

- Avg.hours(US)<Avg.hours(CZ)
- Higher corr(wage,edu) in the US (see next slides)