Leseprobe - vpm

The function τ calculates the after tax household income from the female’s(y t ) and husband’s (y ∗ t ) gross income. The latter depends on two components:a deterministic component in time t, i.e. all husbands are assumed towork full-time and thus accumulate full-time experience, 11 and a stochasticcomponent represented by the husband’s current period productivity shock(ǫ ∗ t ). In contrast, the female’s income depends on her labor supply (l t),accumulated experience (x t ) through past labor force participationx t = x t−1 + l t−1 , with x 1 = 0 (8)and her current period productivity shock (ǫ t ). Similar to the vast majorityof structural models investigating labor supply and fertility choices of marriedfemales, see e.g. Hotz and Miller (1988), Francesconi (2002) or Haanand Wrohlich (2009), I abstract from savings. Child care fees f cc depend onthe number (n) and age (t) of the children, the utilized amount of subsidized(cc s,t ) and non-subsidized (cc ns,t ) child care as well as the gross householdincome. In addition, households receive transfers Υ conditional on the timeperiod (t) and choices (n,l t ). The functional forms for the gross incomesy and y ∗ , the tax schedule τ, the child care fees f cc and transfers Υ arespecified further below in Section 5.1.4.5 Choice VariablesAll choices are assumed to be discrete. Labor supply l can take on threevalues: ⎧⎪⎨ 0 for non-working1l t =4for part-time work ∀ t = 1,... ,6. (9)⎪⎩ 12for full-time workIf the (non-sleeping) time endowment would be 16 hours, then part-timelabor force participation would correspond to four and full-time work toeight hours. Similarly, subsidized cc s and non-subsidized child care cc ns cantake on three values:⎧⎪⎨cc i,t =⎪⎩0 for no paid child care14for paid part-time child care12for paid full-time child care∀ t = 1,2 and i = s,ns. (10)The actual choice of subsidized child care is however restricted by the accessa t to a subsidized child care slot:cc s,t ≤ a t ∀ t = 1,2, (11)11 In the data, 95% of all husbands in the selected sample work full-time.15