Part ii second generation studies of labor supply
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Part II Second-Generation Studies of Labor Supply. 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. 1) Introduction.

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Part II Second-Generation Studies of Labor Supply

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Part ii second generation studies of labor supply

Part IISecond-Generation Studies of Labor Supply

  • 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


1 introduction

1) Introduction

  • Major shortcoming of first-generation studies of labor supply: neglecting the selectivity bias (focus on working cohort only)

  • Data: US, 1975, women


Variables

Variables

  • 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


2 wage equation ln wage 0 1 wa 2 wa 2 3 we 4 ax 5 cit

2) Wage equationLn(wage)=0+1WA+2(WA)2+3WE+4AX+5CIT


2 wage equation ln wage 0 1 wa 2 wa 2 3 we 4 ax

2) Wage equationLn(wage)=0+1WA+2(WA)2+3WE+4AX


Wages of workers vs non workers

Wages of workers vs. non-workers


3 analysis of labor force participation decision ols

3) Analysis of labor force participation decision: OLS


3 analysis of labor force participation decision ols1

3) Analysis of labor force participation decision: OLS


Problem with ols values of lfp outside the range 0 1

Problem with OLS:values of LFP outside the range [0,1]


3 analysis of labor force participation decision probit

3) Analysis of labor force participation decision: PROBIT


3 analysis of labor force participation decision probit predicted values probability to work

3) Analysis of labor force participation decision: PROBITpredicted values = probability to work


Part ii second generation studies of labor supply

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


3 analysis of labor force participation decision logit

3) Analysis of labor force participation decision: LOGIT


Logit marginal effects

LOGIT marginal effects


4 comparing conditional ols and tobit estimates of labor supply

4) Comparing conditional OLS and Tobit estimates of labor supply

  • Avg.hours(US)<Avg.hours(CZ)

  • Higher corr(wage,edu) in the US (see next slides)


Ols for working women

OLS for working women


Ols for the whole sample constructed wages

OLS for the whole sample (constructed wages)


Tobit censored point 0

TOBIT (censored point = 0)


5 heckman two stage method

5) Heckman two-stage method


5 heckman two stage method1

5) Heckman two-stage method


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