Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 22.01.2008, 12:15 - 13:30


Presentation by 

Victoria L. Prowse (Purdue University)


This paper considers the problem of determining the extent of any state dependencies in women's labor supply behavior. Employment outcomes are modeled using a dynamic multinomial choice framework including persistent unobserved heterogeneity with a relatively general distribution. In order to ensure reliable parameter estimates, appropriate restrictions are imposed on the distribution of unobservables. Significant state dependence is present in both full-time and part-time employment. State dependencies are overestimated if persistent unobservables are ignored, and underestimated if an overly restrictive form of persistence is imposed.

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