This dissertation applies recent econometric techniques using control functions to outstanding questions in the labor and development literatures.
The first chapter estimates the Frisch elasticity of labor supply, which represents the intertemporal elasticity of substitution. Previous estimation has focused on hours equations in which individual effects, representing the marginal utility of wealth, enter additively and can be differenced out. Using PSID data, I relax this assumption for a sample of prime-age men. I estimate a semiparametric labor supply equation, using a control function strategy that allows fixed effects to be both non-additive and correlated with the regressors. The average structural function and average partial effects of wages on hours are identified and estimated. The Frisch elasticity is found to be near zero, suggesting that underlying assumptions about separability are not driving the small elasticities found in previous studies.
In the second chapter, I estimate a dynamic fixed-effects hours equation for prime-age men with bias correction. The coefficient on the lagged dependent variable is found to be between 0.31 and 0.33. These estimates suggest that it takes 1.5 years for an individual in the sample to adjust hours of work to a change in the wage or other preference variables, an important consideration in policy evaluation. Failure to correct for dynamic panel bias leads to underestimating this effect by more than 15 percent. Time-varying endogeneity of the wage is handled using a control-function approach.
The third chapter estimates the impact of microcredit borrowing from the Grameen Bank and two similar microfinance institutions in Bangladesh. I find that an increase in the amount borrowed has a positive and significant effect on per-capita household consumption. The estimated elasticity is in the range of 0.193 to 0.212, and these parameters can be interpreted as the impact of borrowing on a randomly selected household in Bangladesh. The model is identified by an assumption on the conditional second moments of the errors. These results contribute to the ongoing debate over whether or not microcredit is helping to reduce poverty.
|Commitee:||Flabbi, Luca, Genicot, Garance|
|School Location:||United States -- District of Columbia|
|Source:||DAI-A 77/03(E), Dissertation Abstracts International|
|Keywords:||Bias correction, Frisch elasticity, Labor supply, Microcredit|
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