Analyzing labor supply behavior with latent job opportunity sets and institutional choice constraints.

In this paper we discuss a general framework for analyzing labor supply behavior in the presence of complicated budget- and quantity constraints of which some may be unobservable. The point of departure is that an individual's labor supply decision can be considered as a choice from a set of discrete alternatives (jobs). These jobs are characterized by attributes such as hours of work, sector specific wages and other sector specific aspects of the jobs. We focus in particular on theoretical justification of functional form assumptions and properties of the random components of the model. The paper also includes an empirical application based on Norwegian data, in which the labor supply of married women is estimated.Labor supply; non-convex budget sets; non-pecuniary job-attributes; sector-specific wages

Justifying functional forms in models for transitions between discrete states, with particular reference to employment-unemployment dynamics

This paper proposes a particular axiomatic approach to motivate the choice of functional forms and distribution of unobservables in continuous time models for discrete panel data analysis. We discuss in particular applications with data on transitions between employment and unemployment. This framework yields a characterization of transition probabilities and duration distributions in terms of structural parameters of the utility function and choice constraints. Moreover, it is discussed how the modeling framework can be extended to allow for involuntary transitions, structural state dependence and random effects

Compensated discrete choice and the Slutsky equation

Consumers often face choice settings in which alternatives are discrete. Examples include choices between variants of differentiated products, modes of urban transportation, residential locations, etc. In this paper compensated price elasticities and a corresponding (aggregate) Slutsky equation for discrete choice models are derived. A remarkable feature of compensated price elasticities in the discrete case is that they usually are not symmetric, as compensated elasticities with respect to a price increase versus a price decrease may be different. Finally, compensated marginal price effects and elasticities are derived for selected examples.Part of this research has had financial support from the Research Council of Norway (the tax research program) and the Frisch Centre for Economic Research

Aggregate marginal costs of public funds

In this paper, we discuss aggregate measures of marginal costs of public funds (MCF) in populations that are heterogeneous with respect to observed as well as unobserved characteristics. We first discuss how to compute MCF in selected examples of traditional (textbook) labour supply models. Next, we review two types of discrete labour supply models proposed in the literature. Subsequently, we discuss how to calculate aggregate measures of MCF for discrete labour supply models. Finally, we apply an estimated two-sector discrete labour supply model to compute MCF based on Norwegian data

Analyzing labor supply behaviour with latent job opportunity sets and institutional choice constraints

In this paper we discuss a general framework for analyzing labor supply behavior in the presence of complicated budget- and quantity constraints of which some are unobserved. The point of departure is that an individual’s labor supply decision can be considered as a choice from a set of discrete alternatives (jobs). These jobs are characterized by attributes such as hours of work, sector specific wages and other sector specific aspects of the jobs. We focus in particular on theoretical justification of functional form assumptions and properties of the random components of the model. The paper includes an empirical application based on Norwegian data, in which the labor supply of married women is estimated

Aggregate marginal costs of public funds

In this paper, we discuss aggregate measures of marginal costs of public funds (MCF) in populations that are heterogeneous with respect to observed as well as unobserved characteristics. We first discuss how to compute MCF in selected examples of traditional (textbook) labour supply models. Next, we review two types of discrete labour supply models proposed in the literature. Subsequently, we discuss how to calculate aggregate measures of MCF for discrete labour supply models. Finally, we apply an estimated two-sector discrete labour supply model to compute MCF based on Norwegian data.publishedVersio

A labor supply model for married couples with non-convex budget sets and latent rationing

The basic assumption in this paper is that individuals make their choices from a set of latent discrete alternatives, called matches. Given the match, hours of work, wages and non-pecuniary characteristics follow. This model allows for very general budget specifications as well as restrictions on job opportunities and hours of work. The model is estimated on Norwegian data from 1979. Some of the results are summarized in wage elasticities and it is demonstrated that they are in the range of what others have obtained. Moreover, aggregate elasticities Which reflect observed as well as unobserved heterogeneity are calculated. We also report estimates derived from alternative specifications of the budget set, ranging from ignorance of taxes at all to a detailed specification of all sorts of taxes and transfers. The results of tax policy simulations are included in the final section of the paper

To what extent are temperature levels changing due to greenhouse gas emissions?

Weather and temperatures vary in ways that are difficult to explain and predict precisely. In this article we review data on temperature variations in the past as well possible reasons for these variations. Subsequently, we review key properties of global climate models and statistical analyses conducted by others on the ability of the global climate models to track historical temperatures. These tests show that standard climate models are rejected by time series data on global temperatures. Finally, we update and extend previous statistical analysis of temperature data (Dagsvik et al., 2020). Using theoretical arguments and statistical tests we find, as in Dagsvik et al. (2020), that the effect of man-made CO2 emissions does not appear to be strong enough to cause systematic changes in the temperature fluctuations during the last 200 years

Theoretical and Practical Arguments for Modeling Labor Supply as a Choice among Latent Jobs

Models of labor supply derived from stochastic utility representations and discretized sets of feasible hours of work have gained popularity because they are more practical than the standard approaches based on marginal calculus. In this paper we argue that practicality is not the only feature that can be addressed by means of stochastic choice theory. This theory also offers a powerful framework for developing a more realistic model for labor supply choices, founded on individuals having preferences over jobs and facing restrictions on the choice of jobs and hours of work. We discuss and clarify how this modeling framework deviates from both the conventional discrete approach (Van Soest, 1995), as well as the standard textbook approach based on marginal calculus (Hausman, 1985). It is argued that a model based on job choice opens up for a more realistic representation of the choice environment, and consequently offers the possibility of conducting a richer set of simulations of alternative policies.labor supply, random utility models, tax reform

Compensated Discrete Choice with Particular Reference to Labor Supply

Dagsvik and Karlström (2005) have demonstrated how one can compute Compensating Variation and Compensated Choice Probabilities by means of analytic formulas in the context of discrete choice models. In this paper we offer a new and simplified derivation of the compensated probabilities. Subsequently, we discuss the application of this methodology to compute compensated labor supply responses (elasticities) in a particular discrete choice labor supply model. Whereas the Slutsky equation holds in the case of the standard microeconomic model with deterministic preferences, this is not so in the case of random utility models. When the non-labor income elasticity is negative the Slutsky equation implies that the compensated wage elasticity is higher than the uncompensated one. In contrast, in our random utility model we show empirically that in a majority of cases the uncompensated wage elasticity is in fact the highest one. We also show that when only the deterministic part of the utility function is employed to yield optimal hours and related elasticities, these elasticities are numerically much higher and decline more sharply across deciles than the random utility ones