Exercise FOL3 Binary
Response, Female Labour Force Participation in the
Davies, Elias and Penn (1992) and Davies (1993) as part of the ESRC funded Social Change and Economic Life Initiative. The data we use is the annual employment behaviour of wives from Rochdale (UK) from the date of their marriage to the end of the survey in 1987. The binary response femp takes the value 1 if a wife was employed in the current year and 0 otherwise. There is a set of explanatory variables that include husband's employment status and age (years). In this exercise we are going to see if we can distinguish state dependence (first order effects) in employment behaviour of wives from unobserved heterogeneity. The same data (wemp.dta) were used by Rabe-Hesketh and Skrondal (2005, exercise 4.5).
Davies, R.B., Elias, P., and Penn, R., (1992), The relationship between a husband's unemployment and his wife's participation in the labour force, Oxford Bulletin of Economics and Statistics, 54, 145-171
Davies, R.B., (1993), Statistical modelling for survey analysis, Journal of the Market Research Society, 35, 235-247.
Rabe-Hesketh, S., & Skrondal, A., (2005), Multilevel and Longitudinal Modelling using Stata, Stata Press, Stata Corp, College Station, Texas
Data description (wemp_base2.dat)
Number of observations = 1274
Number of cases = 144
The variables include the following:
case= identifier for wives
femp=1 if wife is in employment status in current year, 0 otherwise
mune=1 if the husband is in employment in current year, 0 otherwise
time=year of observation-1975
und1=1 if the wife has children under the age of 1, 0 otherwise
und5=1 if the wife has children under the age of 5, 0 otherwise
d=1 if mmmmmm, 2 otherwise?
d1=1 if d=1, 0 otherwise
d0=1 if d=2, 0 otherwise
ylag=femp lagged 1 year
ybase=femp in 1st year
r=2 for all post 1st year observations
r1=0 for all observations
r2=1, if r=2
The first few lines of wemp_base2.dat look like:
1) Estimate a heterogeneous logit (level-2 with case, mass 20) model of female employment participation (femp), with a constant and the lagged female employment participation variable (ylag), mune, und5, and age regressors.
2) Add the initial condition of employed in the 1st year (ybase) to the previous model. How do the inference on the lagged responses (ylag) and the scale effects differ between the two models.
Joint analysis of the initial condition and subsequent responses
Data description (wemp_base.dat)
Number of observations = 1425
Number of cases = 151
The variables are the same as wemp_base2.dat except that this time the variables ylag, r, r1 and r2 take more values.
ylag=femp lagged 1 year, -9 if its the 1st year
r=1, for the initial response, 2 if a subsequent response
r1=1 if d=1, 0 otherwise
r2=1 if d=2, 0 otherwise
The first few rows of wemp_base.dat look like
1) Estimate a common random effect common scale joint logit model (mass 20) of female employment participation (femp). Use constants in both linear predictors. Use the d1 and d2 dummy variables to set up the linear predictors. For the initial response use the regressors: mune, und5, and age regressors. For the subsequent responses use the regressors: the lagged female employment participation variable (ylag), mune, und5, and age. What does this model suggest about state dependence and unobserved heterogeneity?
2) Re-estimate the model using a bivariate model for the random effects (common scale). What is the value of rho? Is this a significant improvement over the common scale parameter model?
3) To the bivariate model add the initial or baseline response (ybase). Does this make a significant improvement to the model?
4) Compare the results obtained for the various models on the covariates and role of employment status in the previous year. Are both state dependence and unobserved heterogeneity present in this data? Do the results on the covariates make intuitive sense?