Simulation estimation of two‐tiered dynamic panel Tobit models with an application to the labor supply of married women

In this paper a computationally practical simulation estimator is proposed for the two‐tiered dynamic panel Tobit model originally developed by Cragg ( 1971 ). The log‐likelihood function simulated through procedures based on a recursive algorithm formulated by the Geweke–Hajivassiliou–Keane simulator is maximized. The simulation estimators are then applied to study the labor supply of married women. The rich dynamic structure of the labor force participation decision as well as hours worked decisions that are conditional on the participation of married women are identified by using the proposed simulation estimators. The average partial effects of the participation and hours worked decisions for married women in response to fertility decisions and increases in the husband's income are also investigated. It is found that the hypothesis that the fertility decision is exogenous and the hypothesis that the husband's income is exogenous to married women's labor supply function are both rejected in the dynamic and static two‐tiered models. Moreover, children aged between 6 and 13 years old may have a negative impact on the hours worked decision for married women that is conditional on their participation. However, these children may provide some positive incentives for married women to participate in the labor force. Copyright © 2009 John Wiley & Sons, Ltd.     

Efficient employment of cohorts of labor in the U.S. economy: An illustration of a method

This paper presents a model for the analysis of efficient labor force participation in the U.S. economy. Ridge regression estimates of the elasticities of cohorts of labor, classified by sex and occupation, are used in conjunction with wage data to illustrate the derivation of efficient allocation of labor cohorts in five economic sectors. These efficient constructs are compared with actual census data for 1960 and 1970. The results, while tentative, show a trend toward more efficient utilization of labor and greater participation by women in the work force.     

Part-Time Employment of Married Women in the U.S.A

A bstract . The rapid growth since 1970, and especially in the 1980s, of part-time and temporary employment was attributed to the transition of the economy from manufacturing to service production and to labor demand side factors. Since part-timers are predominantly women and the majority of the female labor force are married women, the association between the female labor force participation rate and the part-time employment of married women across the 48 continental states of America in 1980 are explored. The empirical study supports the positive association between the two variables, but fails to support the role of the service sector in explaining part-time employment of married women across the states of America.     

Formal sector job growth and women’s labor sector participation : The case of Mexico

This paper looks at the effects of demand and supply on the determinants of labor sector (school, home work, informal, and formal) participation between Torreon and Tijuana, Mexico for married and single women. Comparisons between the two cities are used to capture differences in labor demand. Torreon is a traditional city with an agri-industrial base and Tijuana is a border city with large export processing (maquiladora) and tourism sectors, both of which demand female labor. Factors influencing labor supply include both individual and household characteristics. Married women, given the strong cultural tradition of working in the home, do not significantly increase their paid labor participation with higher labor demand or changing characteristics of the household. Personal characteristics have the greatest impact on labor sector participation. Single women do, however, increase their formal sector participation with additional employment opportunities and respond to household needs by moving in and out of the paid labor market. Results indicate that increases in labor demand in Mexico from the NAFTA could expand formal sector labor force participation of single women.     

Child-custody reform, marital investment in children, and the labor supply of married mothers

Research on child custody primarily focuses on the well-being of children following divorce. We extend this literature by examining how the prospect of joint child custody affects within-marriage investment in children through changes in household bargaining power. Variation in the timing of joint-custody reforms across states provides a natural-experiment framework with which to examine within-marriage investment in children. The probability of children's private school attendance declines by 12% in states that adopt joint-custody laws. We also find evidence linking joint-custody reform to higher rates of labor force participation for married mothers, which may indicate less time devoted household production.     

Analyzing female labor supply — Evidence from a Dutch tax reform

Among OECD countries, the Netherlands has an average female labor force participation, but by far the highest rate of part-time work. This paper investigates the extent to which married women respond to financial incentives. We exploit exogenous variation caused by a substantial Dutch tax reform in 2001. Our main conclusion is that the positive significant effect of the tax reform on labor force participation dominates the negative insignificant effect on working hours. The latter contradicts the common empirical finding of positive wage elasticities. Our preferred explanation is that women respond more to changes in tax allowances than to changes in marginal tax rates.     

The Wage Penalty for Married Women of Career Interruptions: Evidence from the 1970s and the 1990s

The goal of this paper is to assess how the wage penalty for career interruptions by married women changed between the 1970s and the 1990s. We estimate the wage penalty for career interruptions using the work-history model and PSID data. We use several approaches to control for various forms of endogeneity and selection bias. Our empirical results suggest that (i) the wage penalty for married women's career interruptions increased from 40.4% to 73.7% over the period, (ii) the ratio of the wage penalty for married women to that of married men also increased, from 1.33 to 2.43, (iii) Blinder–Oaxaca decompositions show that changes in education- or occupation-specific wage penalties account for most of the wage penalty increase.     

A change in the earnings penalty for British men with working wives: Evidence from the 1980's and 1990's

Using pooled cross-sectional data from 1984–1989 and 1990–1995, two-stage (Tobit/OLS) regressions show that the penalty on male earnings for working wives, found in earlier research for British males in the early 1980's in managerial and other occupations, is not present in the second half of the 1980's and is largely reversed by the 1990's; in most occupational clusters, managers most notably, it is replaced by an earnings premium. The results are consistent with a view that increases in married women's labor force participation in Britain, coupled with positive assortative mating, have overwhelmed any forces tending to reduce male salaries when their wives work.     

The homeownership decision of female-headed households

The homeownership rate of female heads of household is substantially lower than the rate for married women. A number of factors could account for this observation including differences in income and its sources, wealth, demographic characteristics, and the relative price of homeownership. We identify the impact of these factors and find income and the cost of owning relative to renting to be most important. Analysis of changes in female ownership rates over a 10-year period reveals the impact of the Equal Credit Opportunity Act which eased access to the mortgage market. We find evidence that ECOA raised the probability of homeownership for all women. However, much of the difference in ownership rates between married and unmarried women remains unexplained, especially for high income households.     

Social security and two-earner households

In the past decades, elimination of the pay-as-you-go system in U.S. has been extensively discussed and studied. Such an elimination would also eliminate the intragenerational redistribution done by the following policies of social security. Due to spousal and survivor׳s benefit provisions, US Social Security system redistributes (mostly) to single-earner married households. Since retirement benefits are a concave function of past mean earnings, the system redistributes from high earners to low earners. Finally, existence of a cap on social security taxable earnings makes the system regressive. This paper quantifies redistributive, labor supply, and welfare implications of these policies using a general equilibrium life-cycle model. Agents start out as permanently married or single and with education levels and wage profiles, where the latter depend both on education and gender. The household is the decision maker and decides on labor supply of its member(s) and saving. Elimination of these policies results in a 5.5% rise in labor force participation of married females, while increasing aggregate welfare by 0.4%. A majority of households experience positive gains in welfare. Single-earner married households incur large welfare losses (as big as 1.1%), whereas two-earner households with high skilled spouses experience substantial welfare gains (as big as 1.9%).     

Time costs,aspirations and the effect of economic growth on German fertility

Recent research has shown strong support for the model of reproductive behavior derived from the new home economics, and it is shown in this discussion that the evidence from the Federal Republic of Germany is consistent with the new home economics model. There is little support for Easterlin's relative economic hypothesis, but there is limited endorsement for model which adds the influence of experience based material aspirations to the new home economics model. Easterlin's relative income model is reviewed before directing attention to the new home economics model and an explanation of fertility movements in West Germany. The new home economics model focuses on the family division of labor between home activities and work outside the home. The marked decline in German fertility during the 1970s is mostly attributable to factors such as expanding women's earning capacities which increased the importance of 2 earner families, who have a different family division of labor and possibly preferences biased towards "quality" of children rather than numbers. Also, real wage growth lagged behind the growth in experience based aspirations, and this drop in relative income is more dramatic if it is presumed that material aspirations are based upon the family's income experienced by a young adult during his/her adolescence, rather than just the father's earnings. The mother's contribution to family income will contribute to her family's actual standard of living and the desired standard of living of her children. The labor force participation rates of married, middle-aged German women increased markedly during the 1st half of the 1950s, thus tending to enhance the increase in the standard of living desired by the young adults reaching marrying and childbearing ages in the mid-1960s. The analysis indicates that if there is not a substantial reduction in the proportion of young married women in the labor force, fertility will move countercyclically. In that there must be some floor to fertility, one should be cautious of using these parameter estimates considerably outside the 1950-1977 period. Nonetheless, the estimates indicate that economic growth will not bring a substantial rise in German fertility, and, outside the unlikely situation of sustained economic decline, fertility will remain low.     

Social security and the labor supply of older married couples

This paper provides estimates of the impact of social security benefits on the labor force behavior of older married couples in the United States, with the ‘spouse benefit’ provision receiving particular attention. The empirical results using data from the Retirement History Survey show that the spouse benefit provision has a moderately small negative impact on labor force participation by older married women and a small positive impact on the labor force participation of older married men. The results are used to evaluate the potential labor supply impact of a proposal to eliminate spouse benefits and replace them with earnings sharing.     

Endogenous labor force participation and firing costs

I construct a matching model to explain the labor market transition between employment, unemployment and nonparticipation, and evaluate the quantitative effects of firing costs. The model has several features that are distinguished from previous studies: endogenous labor force participation, different job-search decisions and imperfect insurance markets. I find that the model is able to account for the U.S. labor market, especially the gross labor-force transition rates. I also find that firing costs as a type of firing tax have a negative effect on the layoff rate, the job-finding probability and the participation rate. In particular, the effect of a decrease in the job-finding probability is greater than the effect of a decrease in the layoff rate, and this results in an increase in the unemployment-to-population ratio. Finally, firing costs make individuals' job tenures longer and skew the asset distribution to the right.     

Parenthood and the earnings of married men and women

We use longitudinal data to examine the relationship between parenthood, wages, and hours worked for married men and women. We find evidence of negative selection into parenthood, substantial child-related reallocations of time within the household, and heterogeneity in the effects of children on household behavior. In households in which the wife experiences an interruption in employment, mothers' wages and hours worked fall, while fathers' hours and wages increase. In households in which the mother remains continuously attached to the labor force, however, there is no evidence of a wage decline for mothers, and the hours worked by fathers decrease substantially.     

Land Market Restrictions,Women's Labour Force Participation and Wages in a Rural Economy

We analyse the effects of land market restrictions on the rural labour market outcomes for women. The existing literature emphasizes two mechanisms through which land restrictions can affect economic outcomes: collateral value of land, and (in)security of property rights. Our analysis focuses on an alternative mechanism where land restrictions increase costs of migration out of villages. Testable prediction of collateral channel is that wages remain unchanged, but the effects on labour force participation are ambiguous. Insecurity of property rights in land reduces labour force participation, but leaves wages undisturbed. In contrast, if land restrictions work primarily through higher migration costs, labour force participation increases, while wages decline. For identification, we exploit a natural experiment in Sri Lanka where historical malaria played a unique role in land policy. We provide robust evidence of a positive effect of land restrictions on women's labour force participation, but a negative effect on female wages. The empirical results thus contradict a collateral or insecure property rights effect, but supports migration costs as the primary mechanism.     

Fertility, Labor Force Participation and the Relative Income Hypothesis:

Abstract . AN empirical test with Canadian data was made of the relative income hypothesis which states that fertility and labor force participation depend upon relative income, where relative income refers to the current family income level relative to the family's desired income level. The interpretation of the desired income level is modified slightly to mean that it is determined not by the past parental income, as originally formulated, but by contemporaneous income levels of other age groups. An empirical model of labor force participation is estimated for the post-war period. The results on the whole tend to provide empirical support for the relative income hypothesis. The post-war baby boom, which led to a decline in the income of young adults relative to that of older age groups, had the effect of increasing participation rates of young adults, especially of young (married) women.     

Heterogeneity and long-run changes in aggregate hours and the labor wedge

From 1961 to 2007, U.S. aggregate hours worked increased and the labor wedge—measured as the discrepancy between a representative household׳s marginal rate of substitution and the marginal product of labor—declined substantially. The labor wedge is negatively related to hours and is often attributed to labor income taxes. However, U.S. labor income taxes increased since 1961. We examine a model with gender and marital status heterogeneity which accounts for the trends in the U.S. hours and the labor wedge. Apart from taxes, the model׳s labor wedge reflects non-distortionary cross-sectional differences in households׳ hours worked and productivity. We provide evidence that household heterogeneity is important for long-run changes in labor wedges and hours in other OECD economies.     

Gender Differences in Entrepreneurial Propensity*

Using data from representative population surveys in 17 countries, we find that the lower rate of female business ownership is primarily due to women's lower propensity to start businesses rather than to differences in survival rates across genders. We show that women are less confident in their entrepreneurial skills, have different social networks and exhibit higher fear of failure than men. After controlling for endogeneity, we find that these variables explain a substantial part of the gender gap in entrepreneurial activity. Although, of course, their relative importance varies significantly across countries, these factors appear to have a universal effect.     

Race,Self‐Employment,and Labor Absorption

Past studies have argued that in the large cities of developing societies, unemployment is often alleviated when displaced workers are absorbed into the small‐scale entrepreneurial activities of the informal economy. The present study applies this argument to an analysis of women's self‐employment in the U.S. South during the Great Depression. Census data show that in large southern cities in 1940, the unemployment of black women was meaningfully reduced by the self‐employment of these women in domestic service. These data further suggest that dynamics of race, unemployment, and the self‐employment of women in domestic service can be represented by an inverted‐U‐shaped labor absorption curve. These results make several contributions to research on race, labor‐market disadvantage, and self‐employment in the informal sector.     

Analysis of the Changing Influences on Traditional Households' Ownership Patterns

Sociological and economic forces have begun to alter ownership patterns in ways not yet captured by movements in the aggregate ownership rate. While demographic factors such as marital status and family structure remain influential in determining tenure choice, their impact has waned, particularly among the best educated households and those with rising real incomes. Labor market conditions, as evidenced by increasing returns to skill, are more strongly felt than ever before in the housing market. The impact on owning of being highly educated now rivals the influence of being married with minor children. Increasingly delayed ownership is a reality, even for traditional family units with 36- to 45-year-old heads that have not prospered in the labor market. The rising real cost of even relatively inexpensive suburban housing is also beginning to be reflected in a heightened impact for real family income on tenure choice. Finally, race currently is more adversely influential in determining suburban ownership for young, middle-aged minority families than it was in 1960, particularly if the household head is not well educated. We suspect this is due to racially disparate impacts of increasingly rigorous zoning regulations and higher impact fees in the suburbs.