Unemployment and Liquidity Constraints

Vassilis Hajivassiliou and Yannis Ioannides

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: In this paper we propose a modelling approach for labor supply and consumption decisions that is firmly grounded within a utility maximizing framework and allows for a role of such institutional constraints as limited access to borrowing and involuntary unemployment. We report estimates for a system of dynamic probit models with data from the Panel Study of Income Dynamics. These estimations test broad predictions of the theoretical model. One of our models describes a household's propensity to be liquidity constrained in a given period. The second is a dynamic ordered probit model for a labor constraint indicator describing qualitative aspects of the conditions of employment, that is whether the household head is involuntarily overemployed, voluntarily employed, or involuntarily underemployed or unemployed. These models are estimated separately as well as jointly. Our results provide strong support for the basic theory of constrained behavior and the interaction liquidity constraints and exogenous constraints on labor supply.

Date: 1995-05
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Unemployment and liquidity constraints (2007)
Working Paper: Unemployment and Liquidity Constraints (1999)
Working Paper: Unemployment and Liquidity Constraints (1995)
Working Paper: Unemployment and Liquidity Constraints (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0243

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().