The estimation of utility consistent labor supply models by means of simulated scores

H.G. Bloemen, A. Kapteyn

Research output: Contribution to journalArticleScientificpeer-review

10 Citations (Scopus)

Abstract

We consider a utility‐consistent static labor supply model with flexible preferences and a nonlinear and possibly non‐convex budget set. Stochastic error terms are introduced to represent optimization and reporting errors, stochastic preferences, and heterogeneity in wages. Coherency conditions on the parameters and the support of error distributions are imposed for all observations. The complexity of the model makes it impossible to write down the probability of participation. Hence we use simulation techniques in the estimation. We compare our approach with various simpler alternatives proposed in the literature. Both in Monte Carlo experiments and for real data the various estimation methods yield very different results.
Original languageEnglish
Pages (from-to)395-422
JournalJournal of Applied Econometrics
Volume23
Issue number4
Publication statusPublished - 2008

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