erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Estimation of Female Labor Supply Parameters When Self-Employment Is an Option

İhsan Tunalı (Koç University)
Cem Başlevent (Koç University)

Abstract

We use household labor force survey data from Turkey to study both the extensive and intensive margins of female labor supply. We adopt an extended Roy model with three options: home work (non-employment), self-employment, and wage labor. The econometric model we rely on corrects for two forms of self-selection: (i) selection into the labor force, and (ii) selection into wage labor rather than self-employment. The resulting model is of double-selection genre and is estimated using the Heckman-Lee two-step methodology. We also address the issues of endogeneity, identification, normality, and measurement errors and report results from the conventional binary model of labor force participation as well as a 4-state model for the purposes of comparison. Even though the elasticity estimates do not differ, we conclude that the treatment of self-employment and wage labor as distinct participation states is justified in terms of providing a more accurate account of the participation decision.

Economic Research Center
Middle East Technical University
06531 Ankara Turkey
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e-mail: metuerc@metu.edu.tr