Using Monotonicity Restrictions to Identify Models with Partially Latent Covariates
with Wayne Gao, Andrew Postlewaite, and Holger Sieg, Forthcoming in Journal of Econometrics
This paper develops a new method for identifying econometric models with partially latent covariates. Such data structures arise in industrial organization and labor economics settings where data are collected using an input-based sampling strategy, e.g., if the sampling unit is one of multiple labor input factors. We show that the latent covariates can be nonparametrically identified, if they are functions of a common shock satisfying some plausible monotonicity assumptions. With the latent covariates identified, semiparametric estimation of the outcome equation proceeds within a standard IV framework that ac- counts for the endogeneity of the covariates. We illustrate the usefulness of our method using a new application that focuses on the production functions of pharmacies. We find that differences in technology between chains and independent pharmacies may partially explain the observed transformation of the industry structure.
This paper investigates how occupational flexibility affects married couples' labor supply and the gender pay gap around childbirth. Using the NLSY79 data and Goldin's (2014) measure of occupational flexibility, I show that flexibility is a significant determinant of married couples' labor supply adjustments. When a husband's job exhibits low flexibility, couples are more likely to specialize with the wife dropping out of the labor market and the husband increasing hours worked. In contrast, couples with greater flexibility show less labor supply adjustment to childbirth. To analyze the relationship between occupational flexibility and family-friendly labor market policies, I develop and estimate a dynamic discrete choice model of couples' decision-making about labor supply and occupations. In the model, occupations are characterized by wage-hours schedules and flexibility levels. I find that increasing women's and men's own occupational flexibility increases labor force participation by 4 percentage points in the childbirth year. Interestingly, increasing husband's flexibility has a greater impact on the wife's labor adjustment than her own flexibility, augmenting her participation rate and working hours by 10 and 7 percentage points. Finally, I evaluate the effects of family-friendly policies providing temporary flexibility for couples experiencing a birth in the last two years. Policies that target women increase female labor supply and reduce the gender pay gap by 8% in the long run. However, when the benefits are offered to both spouses, the positive effects on the wife's labor supply are weakened, and the gender pay gap expands in the long run.
Research in Progress
Access and Exposure to the Local News Media in the Digital Economy with Lucie L'Heudé, Andrew Postlewaite, and Holger Sieg
Self-Employment Decisions and Household Risk Sharing