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1. Consider the following equation, which shows Ordinary Least Squares estimates of the labour supply of
working women aged 2544.
hours
i
= 19.794  0.004Y
i
+ 1.387w
i
– 0.102w
i
2
+ 1.281M
i
 7.801 K
i
+ 3.210 Own
i
(5.08)
(2.18)
(3.12)
(2.04)
(1.41)
(3.82)
(1.91)
where :
hours is the number of hours worked per week of individual i
Y is other household income (per week)
w is the hourly wage
M is a dummy variable indicating whether the woman is married
K is a dummy variable indicating whether there are children in the household
Own is a dummy variable indicating whether the household is an owneroccupier
Numbers in brackets are (absolute) tratios
The average wage in the sample is £5 per hour, the average level of other household
income is £120 per week, and average hours per week worked is 23.2.
a) Construct a 95% confidence interval for the effect of having children on hours worked.
b) Derive a formula for the elasticity of labour supply with respect to the wage in this model. Does the
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This note was uploaded on 03/03/2010 for the course ECON 1002 taught by Professor Matthewwakefield during the Spring '09 term at UCL.
 Spring '09
 matthewwakefield
 Economics

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