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Simulation estimation of two‐tiered dynamic panel Tobit models with an application to the labor supply of married women
Author(s) -
Chang ShengKai
Publication year - 2011
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.1141
Subject(s) - tobit model , estimator , economics , econometrics , incentive , estimation , fertility , panel data , conditional expectation , labour economics , microeconomics , mathematics , statistics , population , demography , management , sociology
Abstract 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.