Sectoral labour supply, choice restrictions and functional form

Abstract

In this paper we discuss a general framework for analyzing labor supply behavior in the presence of complicated budget-and quantity constraints of which some are unobserved. The point of departure is that an individual's labor supply decision can be considered as a choice from a set of discrete alternatives (jobs). These jobs are characterized by attributes such as hours of work, sector specific wages and other sector specific aspects of the jobs. We focus in particular on theoretical justification of functional form assumptions and properties of the random components of the model. The paper includes an empirical application based on Norwegian data, in which the labor supply of married women is estimated.JEL classification: J22,C51.Key words: Labor supply, non-convex budget sets, non-pecuniary job-attributes, sector-specific wages. ___________________________________ * Statistics Norway, Oslo. E-mail: john.dagsvik@ssb.no ** Department of Economics, University of Oslo. E-mail: steinar.strom@econ.uio.no We are indebted to Tom Wennemo for skillful programming assistance and Rolf Aaberge for constructive critisism throughout the revision process. We thank two anonymous referees and the editor for useful comments and helpful suggestions.We also thank James J. Heckman for valuable comments on an earlier version of the paper and Anne Skoglund for proof reading and word processing. S.Strøm is grateful to ICER, Turin, for providing excellent working conditions. 2

Labor force participation and the discouraged worker effect

“…From Table A1, we observe that the sample selection variable has an insignificant effect. The effects of schooling and experience are consistent with findings in previous analyses using Norwegian data (see, for example, Dagsvik and Strøm, 2006). In agreement with our a priori belief we find, ceteris paribus, that females living in densely populated areas have higher expected real wage rates than females living in sparsely populated areas.…”

Subsidies on low-skilled workers’ social security contributions: the case of Belgium

“…We follow an alternative approach, based on Dagsvik and Jia (2006) and Dagsvik and Strøm (2006): labor supply behavior is viewed as an outcome of agents choosing from a set of job "packages", each of which is characterized by an offered wage rate, offered hours of work and nonpecuniary (qualitative) attributes describing the nature of the job-specific tasks to be performed. Thus, the hours of work of a given job are assumed fixed.…”

“…Dagsvik and Strøm (2004) showed that the model is identified under the restriction that g(.) is a distribution function over the possible positive hours of work.…”

“…11 However, the polynomial functional form is not globally monotone in consumption, and one must therefore check if the estimated function in fact is monotone for the admissible values of consumption. Dagsvik and Strøm (2006) argued that implications from the theory of meaningfulness and dimensional invariance may be used to restrict the functional form of the utility function. Their assumptions lead to a type of generalized Box-Cox utility function given by:…”

“…In our analysis, we have applied an alternative modeling approach based on the model developed by Dagsvik and Strøm (2006) and Dagsvik and Jia (2006). Like the models of Van Soest (1995), this approach is also developed within a discretechoice framework.…”