Pacifico, Daniele (2009): On the role of unobserved preference heterogeneity in discrete choice models of labor supply.
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The aim of this paper is to analyse the role of unobserved preference heterogene- ity in structural discrete choice models of labor supply. Within this framework, unobserved heterogeneity has been estimated either parametrically or nonpara- metrically through random coefficient models. Nevertheless, the estimation of such models by means of standard, gradient-based methods is often difficult, in particular if the number of random parameters is high. For this reason, the role of unobserved taste variability in empirical studies is often constrained since only a small set of coefficients is assumed to be random. However, this simplification may affect the estimated labor supply elasticities and the subsequent policy pre- scriptions. In this paper, we propose a new estimation method based on an EM algorithm that allows us to fully consider the effect of unobserved heterogeneity nonparametrically. Results show that labor supply elasticities and policy prescrip- tions do change significantly only when the full set of coefficients is assumed to be random. Moreover, we analyse the behavioural effects of the introduction of a working-tax credit scheme in the Italian tax-benefit system and show that the magnitude of labor supply reactions and the post-reform income distribution can differ significantly depending on the specification of unobserved heterogeneity.
|Item Type:||MPRA Paper|
|Original Title:||On the role of unobserved preference heterogeneity in discrete choice models of labor supply|
|Keywords:||behavioural microsimulation, labor supply, unobserved heterogeneity, random coefficient mixed models, EM algorithm|
|Subjects:||H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C25 - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
|Depositing User:||Daniele Pacifico|
|Date Deposited:||17. Feb 2010 07:17|
|Last Modified:||17. Feb 2013 04:21|
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Available Versions of this Item
Modelling Unobserved Heterogeneity in Discrete Choice Models of Labour Supply. (deposited 07. Dec 2009 00:24)
Modelling Unobserved Heterogeneity in Discrete Choice Models of Labour Supply. (deposited 15. Jan 2010 16:05)
- On the role of unobserved preference heterogeneity in discrete choice models of labor supply. (deposited 17. Feb 2010 07:17) [Currently Displayed]
- Modelling Unobserved Heterogeneity in Discrete Choice Models of Labour Supply. (deposited 15. Jan 2010 16:05)