Discussion Paper Series

Schwarts, Saul; Hutchens, Robert; and Jakubson, George., "Dynamic Models of the Joint Determination of Labor Supply and Family Structure" NLS Discussion Paper, Report: NLS 92-3

This report deals with an econometric technique - dynamic stochastic discrete choice models, developed to exploit longitudinal data. We use data from the National Longitudinal Surveys Youth cohort (NLSY) and such a dynamic discrete choice model to explore the labor force participation and martial status of young mothers. The theory underlying the econometric model is quite appealing. Expectations about the future are allowed to influence current decisions in an explicit utility-maximization framework. In that sense, our model is a structural one.

Because the dynamic discrete choice model is relatively new and somewhat complicated, this report moves from simple models to more complex models. In the first part we estimate relatively simple models of labor force participation and marriage using standard discrete-choice techniques. Then, we exploit the longitudinal nature of the NLSY by adding lagged values of the two dependent variables to the simple models. The most complicated model is a two-equation simultaneous probit model of labor force participation and marriage.

Aside from the development and implementation of our dynamic discrete choice model using the NLSY, several other interesting results arise from our work on this project:

• we found no evidence of any interdependence between martial status and labor force participation. In particular, in the simultaneous probit model, current labor force participation did not affect current marital status nor did current marital status affect current labor force participation;
  
• adding lagged dependent variables as explanatory variables to the models indicated a higher-than-expected correlation between past labor force status and current status. This leads to the conclusion that except for unobserved factors, the determinants of the "initial condition" seems to persist over time;
  
• the dynamic stochastic discrete choice model did not lead to any results that were substantially different than the results obtained from the simpler models in.
  

Copies of this and other papers in this series are available from BLS by contacting Rita Jain at Jain.Rita@bls.gov or at (202) 691 - 7405.

Last Modified Date: July 09, 2003