Estimating labour supply functions under the rationing constraints of over-and under-employment

Abstract

In this study explicit parametrizations of labour supply are specified and estimated on a sample of single unattached individuals using data from the Panel Study of Income Dynamics, and a generalized tobit maximum likelihood method which is consistent under the assumption that employed hours are exogenous. The estimation methodology explicitly incorporates information on the existence and degree of over-employment and under-employment. For the cases examined it is found that increased generality in the representation of preference is to be desired when estimating labour supply. A surprising finding is that the labour supply responsiveness of a group of single American women who live alone and have no dependants is on a par with estimates for married women examined in earlier studies, and is significantly higher than estimated for American men.