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Full-Text Articles in Social and Behavioral Sciences
Unemployment And Liquidity Constraints, Vassilis A. Hajivassiliou, Yannis M. Ioannides
Unemployment And Liquidity Constraints, Vassilis A. Hajivassiliou, Yannis M. Ioannides
Cowles Foundation Discussion Papers
In this paper we propose a modelling approach for labor supply and consumption decisions that is firmly grounded within a utility maximizing framework and allows for a role of such institutional constraints as limited access to borrowing and involuntary unemployment. We report estimations for a system of dynamic probit models with data from the Panel Study of Income Dynamics. These estimations test broad predictions of the theoretical model. One of our models describes a household’s propensity to be liquidity constrained in a given period. The second is a dynamic ordered probit model for a labor constraint indicator describing qualitative aspects …