Labor Supply as a Choice Among Latent Jobs: Unobserved Heterogeneity and Identification
John K. Dagsvik and Zhiyang Jia
Journal of Applied Econometrics. First published 6 January 2015.
This paper discusses aspects of a modeling framework in which the notion of job choice is fundamental. In this framework, workers are assumed to have preferences over latent job opportunities belonging to worker-specific choice sets from which they choose their preferred job. The main contribution of this paper is an analysis of the identification problem under various conditions, when conventional cross-section micro-data are applied. The modeling framework is applied to analyze labor supply behavior for married/cohabiting couples using Norwegian micro data. Based on the empirical model, we discuss further qualitative properties of the model and simulation of counterfactual policy reforms.