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Simultaneity in binary outcome models with an application to employment for couples.

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This study introduces a new econometric model for analyzing employment within households. It finds that couple

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Area of Science:

  • Econometrics
  • Sociology
  • Labor Economics

Background:

  • Peter Schmidt's prior work on simultaneous logit models and dynamic linear fixed effects panel data models.
  • The need for models that account for lagged dependent variables and fixed effects in short panels.
  • Existing models may not fully capture intra-household dynamics.

Purpose of the Study:

  • To develop and apply an estimation strategy for a dynamic panel data version of a bivariate model.
  • To analyze the intra-household relationship in employment, considering couple's ethnicity.
  • To investigate unobserved household-specific heterogeneity's impact on employment dependence.

Main Methods:

  • Combining a conditional likelihood approach with a method of moments approach.
  • Utilizing a dynamic panel data model with lagged dependent variables and fixed effects.
  • Applying the estimation strategy to intra-household employment data.

Main Results:

  • The developed estimation strategy is successfully applied to a model of intra-household employment.
  • Significant differences in within-household employment dependence were observed based on couple's ethnicity.
  • These differences persist even after accounting for unobserved household-specific heterogeneity.

Conclusions:

  • The intra-household dependence in employment is significantly influenced by the ethnicity composition of the couple.
  • The proposed econometric model effectively captures complex household employment dynamics.
  • Unobserved household heterogeneity does not fully explain the observed ethnic differences in employment dependence.