Chapter 32 LABOR ECONOMETRICS* In the past twenty years, the field of labor economics has been enriched by two developments: (a) the evolution of formal neoclassical models of the labor market and (b) the infusion of a variety of sources of microdata. | Chapter 32 LABOR ECONOMETRICS JAMES J. HECKMAN University of Chicago THOMAS E. MACURDY Stanford University Contents 0. Introduction 1918 1. The index function model 1920 . Introduction 1920 . Some definitions and basic ideas 1921 . Sampling plans 1926 2. Estimation 1929 . Regression functions characterizations 1930 . Dummy endogenous variable models 1945 3. Applications of the index function model 1952 . Models with the reservation wage property 1952 . Prototypical dummy endogenous variable models 1959 . Hours of work and labor supply 1963 4. Summary 1971 Appendix The principal assumption 1972 References 1974 Heckman s research on this project was supported by National Science Foundation Grant No. SES-8107963 and NIH Grants R01-HD16846 and R0I-HD19226. MaCurdy s research on this project was supported by National Science Foundation Grant No. SES-8308664 and a grant from the Alfred P. Sloan Foundation. This paper has benefited greatly from comments generously given by Ricardo Barros Mark Gritz Joe Hotz and Frank Howland. Handbook of Econometrics Volume III Edited by Z. Griliches and M. D. Intriligator Elsevier Science Publishers BV 1986 1918 J. J. Heckman and T. E. MaCurdy 0. Introduction In the past twenty years the field of labor economics has been enriched by two developments a the evolution of formal neoclassical models of the labor market and b the infusion of a variety of sources of microdata. This essay outlines the econometric framework developed by labor economists who have built theoretically motivated models to explain the new data. The study of female labor supply stimulated early research in labor econometrics. In any microdata study of female labor supply two facts are readily apparent that many women do not work and that wages are often not available for nonworking women. To account for the first fact in a theoretically coherent framework it is necessary to model corner solutions choices at the extensive margin along with .
