A Microeconomic Model of Female Labour Supply in the Presence of Unemployment and Underemployment

Guy Lacroix and Pierre Frechette

Annals of Economics and Statistics, 1994, issue 36, 113-131

Abstract: In this paper we model female labor supply within a discrete choice framework. Two different rationing mechanisms are incorporated into the model: involuntary unemployment and underemployment. The model is set-up as a generalization of the Double-Hurdle model of Cragg [1971]. Our estimation strategy consists in estimating the model first without taking into account the rationing mechanisms (Model 1). Next we introduce these mechanisms but do not use the information on sample separation (Model 2). Finally, the information is used and the likelihood altered accordingly (Model 3). It turns out the information on rationing makes a dramatic difference on the preference parameters and hence, on desired hours of work. This suggest that the labor supply models that incorporate unobserved constraints are potentially biasing the estimation of preference parameters. Our results show that the uncompensated wage and income elasticities are slightly overestimated in Model 1 and largely underestimated in Model 2 relative to Model 3.

Date: 1994
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: A Microeconomic Model of Female Labor Supply in the Presence of Unemployment and Underemployment (1992)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1994:i:36:p:113-131

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