Volume 35, Number 1 (Winter) 2000
Eklöf, Matias, and Hans Sacklén. 2000. "The Hausman-MaCurdy Controversy: Why Do the Results Differ across Studies?" Journal of Human Resources 35(1): 204-220.
The two perhaps most influential empirical labor supply studies carried out in the United States in recent years, Hausman (1981) and MaCurdy, Green, and Paarsch (1990), report sharply contradicting labor supply estimates. In this paper we show that the seemingly irreconcilable views on the size of work disincentive effects and welfare losses can be attributed to the use of differing nonlabor income and wage measures in the two studies. Monte Carlo experiments suggest that the wage measure adopted by MaCurdy, Green, and Paarsch (1990) might cause a severely downward biased wage effect such that data falsely refute the basic notion of utility maximization.
Matias Eklöf is a fellow researcher of economics at Uppsala University. Hans Sacklén is a senior researcher at the Trade Union Institute for Economic Research in Stockholm, Sweden. Helpful comments on earlier drafts from Sören Blomquist, Jerry Hausman, Arthur van Soest, and two anonymous referees are greatly appreciated. The data used in this article can be obtained beginning April 2000 through March 2003 from Matias Eklöf, Uppsala University, Department of Economics, Box 513, S-751 20 Uppsala, Sweden.
© 2002 by the Board of Regents of the University of Wisconsin System
US ISSN 0022-166X