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Dynamic Models of the Joint Determination of Labor Supply and Family Structure

Saul Schwartz, Robert Hutchens, and George Jakubson


The past twenty-five years have seen the emergence of a number of important longitudinal data sets. Foremost among these is the set of surveys known, collectively, as the National Longitudinal Surveys (NLS). The availability of nationally-representative, longitudinal data has spawned a variety of econometric methods designed to study the economic behavior of individuals over time. These include hazard rate analysis, event history studies and techniques for pooling time-series and cross-sectional data.

This report deals with another econometric model developed to exploit longitudinal data — dynamic stochastic discrete choice models (Eckstein and Wolpin, 1989). We use data from the National Longitudinal Survey — Youth Cohort (NLS-Y) to explore a dynamic discrete choice model of the labor force participation and martial status of young mothers. The theory underlying such a model is quite appealing. Expectations about the future are allowed to influence current decisions in an explicit utility-maximization framework. In that sense, our model is a structural one.