Estimation of Permanent and Transitory Response Functions in Panels Data: A Dynamic Labor Supply Model / Lee A. Lillard.

By:

Lillard, Lee A

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0185.Publication details: Cambridge, Mass. National Bureau of Economic Research 1977.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: The purpose of this paper is to develop and test a dynamic labor supply model which incorporates the essential features of these previous models. The issues of permanent and transitory effects and of cross section versus time series can be addressed much more directly given the recent availability of panel data featuring repeated observation over extended periods of time of the same individuals. The labor supply model presented emphasizes the effect of permanent individual wage differences on permanent annual hours of work and the effect of serially correlated transitory individual wage variation on short run hours of work. Permanent and transitory deviations from the aggregate labor supply functions are also allowed. A by-product is an analysis of the relative roles of permanent and transitory components of both wages and hours in the distribution of earnings. The first section introduces the topic and describes related works. The second section provides a description of the essential features of the model. Section III provides a detailed outline of the empirical model and method of obtaining maximum likelihood estimates of parameters. Section IV provides a discussion of the results including the components of variation in wages, hours, and earnings. Comparisons are made by schooling group, by experience group, by union status, and by wife's work status. Finally the results are summarized in Section V.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0185 (Browse shelf(Opens below))	Not For Loan

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July 1977.

The purpose of this paper is to develop and test a dynamic labor supply model which incorporates the essential features of these previous models. The issues of permanent and transitory effects and of cross section versus time series can be addressed much more directly given the recent availability of panel data featuring repeated observation over extended periods of time of the same individuals. The labor supply model presented emphasizes the effect of permanent individual wage differences on permanent annual hours of work and the effect of serially correlated transitory individual wage variation on short run hours of work. Permanent and transitory deviations from the aggregate labor supply functions are also allowed. A by-product is an analysis of the relative roles of permanent and transitory components of both wages and hours in the distribution of earnings. The first section introduces the topic and describes related works. The second section provides a description of the essential features of the model. Section III provides a detailed outline of the empirical model and method of obtaining maximum likelihood estimates of parameters. Section IV provides a discussion of the results including the components of variation in wages, hours, and earnings. Comparisons are made by schooling group, by experience group, by union status, and by wife's work status. Finally the results are summarized in Section V.