In this paper I develop a practical extension of McFaddens method of simulated moments estimator for limited dependent variable models to the panel data case. The method is based on a factorization of the MSM first order condition into transition probabi

Two key issues in the literature on female labor supply are (i) whether persistence in employment status is due to unobserved heterogeneity or state dependence, and (ii) whether fertility is exogenous to labor supply. Until recently, the consensus was that unobserved heterogeneity is very important and fertility is endogenous. Hyslop (1999) challenged this. Using a dynamic panel probit model of female labor supply including heterogeneity and state dependence, he found that adding autoregressive errors led to a substantial diminution in the importance of heterogeneity. This, in turn, meant he could not reject that fertility is exogenous. Here, we extend Hyslop (1999) to allow classification error in employment status, using an estimation procedure developed by Keane and Wolpin (2001) and Keane and Sauer (2005). We find that a fairly small amount of classification error is enough to overturn Hyslop's conclusions, leading to overwhelming rejection of the hypothesis of exogenous fertility.