Arie Kapteyn, Peter Kooreman, Arthur van Soest, Quantity Rationing and Concavity in a Flexible Household Labor Supply Model, The Review of Economics and Statistics, Vol. 72, No. 1 (Feb., 1990), pp. 55-62

We use panel data to analyze the determinants of speaking fluency and wages of immigrants. Our model takes account of two problems that may bias OLS estimates of the impact of speaking fluency on earnings. First, subjective variables on an ordinal discrete scale, such as self-reported language ability, can suffer from misclassification errors. The model decomposes misclassification errors into a time-persistent and a time-varying component. Second, the model accounts for correlated unobserved heterogeneity in language and earnings equation. The main finding is that these two generalizations of the standard model both lead to substantial changes in the estimated effect of speaking fluency on earnings.

We analyze labor supply behavior and the choice between formal and informal sector work of the two spouses in families in urban areas of a developing country, using cross-section data from Bolivia drawn in 1989. The model generalizes the neoclassical family labor supply model. Nonmonetary returns of formal sector employment capture the fact that the choice between sectors is not exclusively based on wage differentials. Wage equations, nonmonetary returns equations, and labor supply equations are estimated jointly by smooth simulated maximum likelihood. We find substantial cross-wage elasticities of working hours of both partners, and large substitution elasticities between the two sectors.

This paper analyzes the ownership dynamics of stocks and mutual funds, using representative household panel data, the Dutch CentER Savings Survey 1993–1998. A bivariate dynamic binary-choice model is introduced, allowing for interactions between the two types of assets. We find that unobserved heterogeneity and state dependence play a large role for both types of assets. The positive relation between ownership of one type in one period and the other type in the next period is explained by correlated unobserved heterogeneity. A negative state-dependence effect of lagged ownership of stocks on ownership of mutual funds is found, which can be explained by the costs of shifting funds across the two forms of stockholding.