Estimation of the female labor supply models by Heckman’s two-step estimator and the maximum likelihood estimator

Abstract

The female labor supply models have been widely used in labor economics. The models are usually estimated by Heckman’s two-step estimator. However, Heckman’s two-step estimator often performs poorly. This paper considers an estimation of the models by the maximum likelihood method. An algorithm which makes calculation of the maximum likelihood estimator (MLE) possible is proposed. The finite sample properties are compared using Monte Carlo experiments.