The Joint Estimation of a Non-Linear Labour Supply Function and a Wage Equation Using Simulated Response Probabilities

When applying maximum likelihood estimation in jointly estimating a labour supply function and a wage equation, it may be practically impossible, both analytically and numerically, to calculate the required response probabilities, especially if the model is non-linear. As an alternative, we consider various simulation estimators. In both Monte Carlo experiments and empirical applications the methods are compared to each other and to ML. The methods are computationally feasible and perform well.