Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/79819 
Year of Publication: 
2013
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Labor Supply No. D17-V2
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg
Abstract: 
Although discrete hours choice models have become the workhorse in labor supply analyses. Yet, they are often criticized for being a black box due to their numerous underlying modeling assumptions, with respect to, e.g., the functional form, unobserved error components or several exogeneity assumptions. In this paper, we open the black box and show how these assumptions affect the statistical fit of the models and, more importantly, the estimated outcomes, i.e., estimated labor supply elasticities. In total we estimate 2,219 different model specifications. Our results show that the specification of the utility function is not crucial for performance and predictions of the model. We find however that the estimates are extremely sensitive to the treatment of the wages a neglected dimension so far. We show that, e.g., the choice between predicting wages for the full sample instead of using predicted wages only for non-workers two methods frequently used increases labor supply elasticities by up to 100 percent. As a consequence, we propose a new estimation strategy which overcomes the highly restrictive but commonly made assumption of independence between wages and the labor supply decision.
JEL: 
C25
C52
J22
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.