TY  - RPRT
        AU  - Keane, Michael P.
AU  - Sauer, Robert M.
        TI  - Classification Error in Dynamic Discrete Choice Models: Implications for Female Labor Supply Behavior
        PY  - 2006/Sep/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2332
        UR  - https://www.iza.org/index.php/publications/dp2332
        AB  - Two key issues in the literature on female labor supply are: (1) if persistence in employment status is due to unobserved heterogeneity or state dependence, and (2) if fertility is exogenous to labor supply. Until recently, the consensus was that unobserved heterogeneity is very important, and fertility is endogenous. But Hyslop (1999) challenged this. Using a dynamic panel probit model of female labor supply including heterogeneity and state dependence, he found that adding autoregressive errors led to a substantial diminution in the importance of heterogeneity. This, in turn, meant he could not reject that fertility is exogenous. Here, we extend Hyslop (1999) to allow classification error in employment status, using an estimation procedure developed by Keane and Wolpin (2001) and Keane and Sauer (2005). We find that a fairly small amount of classification error is enough to overturn Hyslop’s conclusions, leading to overwhelming rejection of the hypothesis of exogenous fertility.
        KW  - classification error
KW  - discrete choice
KW  - fertility
KW  - female labor supply
KW  - simulated maximum likelihood
        ER  -