Nonparametric Estimation of Labor Supply Functions Generated by Piece Wise Linear Budget Constraints

Sören Blomquist and Whitney Newey

No 1997:24, Working Paper Series from Uppsala University, Department of Economics

Abstract: The basic idea in this paper is that labor supply can be viewed as a function of the entire budget set, so that one way to account non-parametrically for a nonlinear budget set is to estimate a nonparametric regression where the variable in the regression is the budget set. In the special case of a linear budget constraint, this estimator would be the same as nonparametric regression on wage and nonlabor income. Nonlinear budget sets will in general be charac-terized by many variables. An important part of the estimation method is a procedure to reduce the dimensionality of the regression problem. It is of interest to see if nonparametrically estimated labor supply functions support the result of earlier studies using parametric methods. We therefore apply parametric and nonparametric labor supply functions to calculate the effect of recent Swedish tax reform. Qualitatively the nonparametric and parametric labor supply functions give the same results. Recent tax reform in Sweden hasincreased labor supply by a small but economically important amount.

Keywords: Nonparametric estimation; labor supply; nonlinear budget constraints; tax reform (search for similar items in EconPapers)
JEL-codes: C14 H24 J22 (search for similar items in EconPapers)
Pages: 38 pages
Date: 1997-09-04
New Economics Papers: this item is included in nep-ecm, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Nonparametric Estimation with Nonlinear Budget Sets (2002)
Working Paper: Nonparametric Estimation with Nonlinear Budget Sets (1999)
Working Paper: Nonparametric Estimation of Labor Supply Functions Generated by Piece Wise Linear Budget Constraints (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:1997_024

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