Estimating Labor Force Joiners and Leavers Using a Heterogeneity Augmented Two-Tier Stochastic Frontier

Arbeitspapier

We derive a non-standard unit root serial correlation formulation for intertemporal adjustments in the labor force participation rate. This leads to a tractable three-error component model, which in contrast to other models embeds heterogeneity into the error structure. Unlike in the typical iid three-error component two-tier stochastic frontier model, our equation's error components are independent but not identically distributed. This leads to a complex nonlinear likelihood function requiring identification through a two-step estimation procedure, which we estimate using Current Population Survey (CPS) data. By transforming the basic equation linking labor force participation to the working age population, this paper devises a new method which can be used to identify labor market joiners and leavers. The method's advantage is its parsimonious data requirements, especially alleviating the need for survey based longitudinal data.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 10534

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Model Construction and Estimation ; Labor Force and Employment, Size, and Structure
• Subject: two-tier stochastic frontier ; identification ; labor force dynamics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Das, Tirthatanmoy ; Polachek, Solomon
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/161157
• Last update: 10.03.2025, 11:44 AM CET