Part I First-Generation Studies of Labor Supply

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Part IFirst-Generation Studies of Labor Supply

• 1) Data selection
• 2) Data inspection
• 3) Model(s) selection
• 4) Country comparison

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1) Data selection

• US data 1975, working and non-working women,
  non-zero observations on their husbands
• Czech data 1996, employed men and women
• The common cohort married women who work for pay

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Czech variables

• AGE age
• KIDS number of children aged lt 15 y.
• EDU education
• HOURS daily working hours
• EARN gross nominal monthly wage
• AGE2 AGE2
• EARN2 EARN2
• LHOURS ln(HOURS)
• LEARN ln(EARN)

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US variables

• HOURS...labor supply..daily working hours
• WA..age
• WE...education
• WW..wage.hourly wage rate
• KIDSnumber of children less than 18 years old
• LWW ln(WW)
• LHOURS ln(HOURS)
• WW2WW2
• WA2WA2

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2) Data inspection

• Exclude missing observations (Earn, Hours)
• Exclude outliers (Earn0Hoursgt0, Hoursgt16 per
  day)
• Make comparable age cohorts (US sample includes
  women aged from 30 to 60)

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Data inspection
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Data inspection

• Avg.hours(US)ltAvg.hours(CZ)
• Higher corr(wage,edu) in the US (see next slides)

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The relationship between wage and education
Czech Republic
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The relationship between wage and education U.S.
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3) Model selection

• Linear model
• HOURS ?0 ?1EARN ?2EARN2 ?3AGE
  ?4AGE2 ?5KIDS ?6EDU ?
• Log-linear model
• LHOURS ?0 ?1EARN ?2EARN2 ?3AGE
  ?4AGE2 ?5KIDS ?6EDU ?
• LHOURS ?0?1LEARN?2AGE ?3AGE2 ?4KIDS
  ?5EDU ?

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Model selection

• Final specifications
• HOURS ?0 ?1EARN ?2EARN2 ?3AGE ?4EDU
  ? (1)
• LHOURS ?0 ?1EARN ?2EARN2 ?3AGE
  ?6EDU ? (2)
• LHOURS ?0 ?1LEARN ?2AGE ?3EDU
  ? (3)

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The final specification LHOURS 0.207
0.246LEARN - 0.001AGE - 0.012EDU
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5) Country comparison estimation of the
selected model (3) applied to the U.S. data
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5) Country comparison modified model (3)
applied to the U.S. data (wa - age - is
excluded kids is added)
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Difference between Czech and US results

• Number of children is insignificant for labor
  supply decisions of Czech women (but is
  significant for American women)
• Age is insignificant in the U.S. case (but is
  significant in the Czech case)