Imai, Susumu
Intertemporal Labor Supply and Human Capital Accumulation
Ph.D. Dissertation, University of Minnesota, 1998
Cohort(s): NLSY79
Publisher: UMI - University Microfilms, Bell and Howell Information and Learning
Keyword(s): Labor Economics; Labor Supply; Modeling;

There has been considerable interest in both labor economics and macro economics in estimating the intertemporal elasticity of substitution for labor supply. Even though numerous papers have been written on this subject, most of them either do not assume that agents are accumulating human capital, or assume away the people who supply zero hours of labor. Other papers explicitly include human capital accumulation as well as corner solutions, but then they only allow for discrete choice of hours. The main reason most researchers have not solved and estimated the continuous choice labor supply model is because of the extreme computational difficulty of solving a dynamic model where individuals have continuous choice over both hours and consumption. In this paper, I solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption over a continuum of positive real numbers, and that allows for both human capital accumulation and savings. I develop an algorithm which solves the continuous variable dynamic programming problem, and then use the value function derived from it to calculate the likelihood function for Maximum Likelihood estimation. The main advantage of this estimation method which is based on full solution of this type of model is that it provides a framework from which, given the parameter estimates, one can implement various simulation exercises straightforwardly. Euler equation based GMM estimation has been done for the model, but it is impossible to simulate the model only from the Euler equations. Other problems with using GMM estimation are that measurement error as well as poor instruments bias the parameter estimates, and in particular, because of the possibility of nonconvexity in the model of labor supply with human capital accumulation, first order conditions do not guarantee optimal consumption and labor supply choice. My ML estimation avoids all these problems inherent in the GMM approach. ... I use the male sample in the NLSY data ...and simulate data from the model with the estimated parameters. Using the simulated data. I then estimate consumption and labor supply.

Imai, Susumu
Intertemporal Labor Supply and Human Capital Accumulation
Presented: New York, NY, Econometric Society Winter Meeting, 1999
Cohort(s): NLSY79
Publisher: Econometric Society
Keyword(s): Human Capital; Labor Economics; Labor Supply; Life Cycle Research; Modeling;

Permission to reprint the abstract has not been received from the publisher.

Also: Presented: New Haven, CT, Yale University, Cowles Foundation Conference on Strategy and Decision Making, 2000.

There has been considerable interest in both labor economics and macro economics in estimating the intertemporal elasticity of substitution for labor supply. In this paper, I solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption over a continuum of positive real numbers, and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than those estimated by MaCurdy (1981) or Altonji (1985), and that their estimates are biased downwards because of the omission of the human capital accumulation effect. The human capital accumulation effect renders the life-cycle path of the shadow wage relatively flat, even though wages increase significantly with age. Hence, a rather flat lifecycle labor supply path can be reconciled with a high intertemporal elasiticity of substitution.

Imai, Susumu
Intertemporal Labor Supply and Human Capital Accumulation
Presented: Houston, TX, Southeast Economic Theory and International Economics Meetings, October 2000
Cohort(s): NLSY79
Publisher: Southeast Theory and International Economics Meetings, Rice University
Keyword(s): Human Capital; Labor Economics; Labor Supply; Life Cycle Research; Modeling;

Permission to reprint the abstract has not been received from the publisher.

I solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption over a continuum of positive real numbers, and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than those estimated by MaCurdy (1981) or Altonji (1985). The human capital accumulation effect renders the life-cycle path of the shadow wage relatively flat. Hence, a rather flat lifecycle labor supply path can be reconciled with a high intertemporal elasticity of substitution.

Imai, Susumu
Keane, Michael P.
Intertemporal Labor Supply and Human Capital Accumulation
International Economic Review 45,2 (May 2004): 601–641.
Also: http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2354.2004.00138.x/abstract
Cohort(s): NLSY79
Publisher: Blackwell Publishing, Inc. => Wiley Online
Keyword(s): Human Capital; Labor Supply; Savings; Wages;

We solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than the conventional estimates and the downward bias comes from the omission of the human capital accumulation effect. The human capital accumulation effect renders the life-cycle path of the shadow wage relatively flat, even though wages increase with age. Hence, a rather flat life-cycle labor supply path can be reconciled with a high intertemporal elasticity of substitution.