A structural labour supply model with flexible preferences

Arthur van Soest, Marcel Das, Xiaodong Gong, Xiaodong Gong

    Research output: Contribution to journalArticle

    Abstract

    We show how non-parametric flexibility can be attained in a structural labour supply model that can be used to analyse all sorts of (non-linear) tax and benefits reforms. The direct utility function is approximated with a series expansion. For given length of the expansion, the model is estimated by smooth simulated maximum likelihood, using Dutch data on labour supply of married females. Estimates of own and cross wage elasticities and tax reform effects suggest that a series expansion of order two is enough. Monte Carlo simulations show that the estimator performs very well, unless there is measurement error in the hours variable.
    Original languageEnglish
    Pages (from-to)345-374
    JournalJournal of Econometrics
    Volume107
    Issue number1-2
    DOIs
    Publication statusPublished - 2002

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