Econometric Analysis of Labour Supply and Work Incentives
This chapter provides an indication of potential sources of bias in the Family Expenditure Survey data. The foregoing comments have provided an illustration of the biases to be expected in our hypothetical budget constraint parameters arising from use of Family Expenditure Survey data. The data used throughout the study is taken from the Family Expenditure Surveys for the years 1978 and 1981. The subject of labour supply has been the focus of much research and controversy over the years. This is probably due to the difficult economic and statistical problems encountered in the area, and also perhaps due to the sensitive nature of the subject matter. For most of the changes in the tax-benefit system, the effect on all the work incentive parameters would have to be ascertained, before the impact of the measures could be calculated from econometric model. The examination of the determinants of labour force participation encountered many of the econometric problems typically found in this field.