Labor Supply and the Value of the Housewife's Time.

by John F. Cogan


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This report evaluates four alternative procedures for estimating the value of the married woman's time and the parameters of her labor supply function: (1) Labor Supply Model I uses as the sample for estimation only those women who are labor force participants. (2) Labor Supply Model II uses the entire sample, regardless of labor force status. Two versions of Model II are considered: ordinary least squares and limited dependent variable (Tobit) regression. (3) R. Gronau's procedure estimates the price of the nonworking woman's time directly from data on market wage rates and labor force participation rates. (4) Heckman's maximum likelihood approach estimates the parameters of the market wage and labor supply functions simultaneously. Gronau's procedure is found inferior, on methodological grounds, to both Models I and II. On conceptual grounds, Heckman's procedure is superior, but more costly to implement than Model I or II. In comparing predicted labor force participation rates with actual rates, Model II's Tobit prediction was the more accurate. 42 pp. Bibliog. (DGS)

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