A review of static and dynamic models of labour supply and labour market transitions

Michal Myck and Howard Reed
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Howard Reed: Institute for Fiscal Studies

No W06/15, IFS Working Papers from Institute for Fiscal Studies

Abstract: This paper aims to review the techniques and methods which have been developed by researchers to study labour supply and employment, unemployment and inactivity in the labour market. Progress in labour supply modelling in the last thirty years or so has been considerable. Firstly, the theory of labour supply has become much more sophisiticated; simple static-period models of the budget constraint and the hours decision have been augmented with new developments such as intertemporal optimisation, explicit treatment of the participation decision as distinct from the hours decision, and search theory. Secondly, the econometric techniques available to estimate these more advanced models on the data have expanded massively, along with increases in the amount and quality of data available and huge improvements in computing power. In this report we aim to provide a comprehensive survey of the state of the art in the field of labour supply estimation.

Pages: 118 pp.
Date: 2006-08-07
New Economics Papers: this item is included in nep-dge and nep-lab
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