Modeling Employment Dynamics With State Dependence and Unobserved Heterogeneity

Victoria Prowse

Journal of Business & Economic Statistics, 2012, vol. 30, issue 3, 411-431

Abstract: This study extends existing work on the dynamics of labor force participation by distinguishing between full-time and part-time employment and by allowing unobserved heterogeneity in the effects of previous employment outcomes, children and education on labor supply behavior. In addition, unobserved heterogeneity may feature autocorrelation and correlated random effects. The results reveal significant variation in the effects of children and education on labor supply behavior. Moreover, the omission of random coefficients and autocorrelation biases estimates of state dependencies. On average, temporary shocks that increase the rate of part-time employment lead subsequently to lower rates of nonemployment than do shocks that temporarily increase the rate of full-time work. The article has additional online supplementary material.

Date: 2012
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Related works:
Working Paper: Modeling employment dynamics with state dependence and unobserved heterogeneity (2012)
Working Paper: Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity (2010)
Working Paper: Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity (2007)
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DOI: 10.1080/07350015.2012.697851

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