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Title: Lifecycle-Consistent Female Labor Supply with Nonlinear Taxes: Evidence from Unobserved Effects Panel Data Models with Censoring, Selection and Endogeneity

Citation Type: Miscellaneous

Publication Year: 2011

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Abstract: This paper uses the PSID from 1979-2005 to estimate lifecycle-consistent labor supply elasticities of U.S. females with nonlinear taxes, in a two-stage budgeting framework. The paper is the first to estimate U.S. female labor supply models using semiparametric unobserved effects panel data methods with censoring, selection and endogeneity. The paper finds that female labor supply elasticities are sensitive to both the method used to account for unobserved effects and to economic assumptions regarding lifecycle behavior and taxes. Participation and hours wage elasticities are substantially smaller for unobserved effects panel data models compared with pooled panel data models pointing to upward bias from ignoring unobserved heterogeneity. The estimated lifecycle-consistent uncompensated wage elasticity for U.S. females from the correlated random effects model with instrumentalvariables is 0.37 on the extensive margin and 0.27 on the intensive margin, implying an overall wage elasticity of 0.64. Fixed effects models yield an overall wage elasticity of 0.61 compared with 0.80 from pooled panel models.

User Submitted?: No

Authors: Kumar, Anil

Publisher: Federal Reserve Bank of Dallas

Data Collections: IPUMS USA, IPUMS CPS

Topics: Gender, Labor Force and Occupational Structure, Other

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