Participation and hours of work: two stages in the life-cycle of married women

A 1979 cross-section of Dutch households is used to estimate an integrated labor force participation and hours of work labor supply model for women. Young women and older women are found to behave differently. Wage and income elasticities are always higher for older than for younger women (in absolute terms), and the relative importance of participation and hours elasticities is reversed as the average woman grows older, thereby implying that younger women tend to be more preoccupied with the participation decision whereas older women are more concerned with the hours decision. Econometrically the paper builds on Heckman's (1974) participation cum-hours model by adapting the estimation method to allow for the fact that hours worked are only observed in intervals. A maximum likelihood model in which we integrate over parts of the hours distribution is used. This technique, though computationally involved, gave satisfying results. We compare the results with estimates of a similar but much simpler probit model to identify the possible biases in the simpler approach.