Much ado about nothing: conditional logit vs. random coefficient models for estimating labour supply elasticities

Abstract

This study compares several specifications of discrete choice labour supply estimations on basis of the German Socio Economic Panel. The results suggest that despite the restrictive assumptions of the error terms the conditional logit model provides an adequate model choice for the analysis of labour supply functions. Significance tests, which are based on bootstrapped confidence intervals, show that labour supply elasticities derived within the conditional logit model do not significantly differ from elasticities derived in flexible random coefficient models.