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Abstract

In this paper we present a modification of the usual labor market model. Three wage concepts are introduced. We assume that the worker has a minimum wage in mind for which she is willing to participate and that the employer has a maximum wage in mind, which he is willing to pay for a specific type of labor. If the female does not work we assume that the institutional wage does not lie between those wage levels. This model is estimated on a cross-section data set of 6352 working and non-working married females. We employ a flexible simulated EM-algorithm where we simulate from individually varying sets with positive or zero measure in IR3 and ile. The estimated model indicates that the presence of young children does not only reduce the female's willingness to participate but also the employer's willingness to hire. On the basis of the model we differentiate unemployment as being due to unwillingness of the worker, the employer or both to supply and demand of labor at the present institutional wage level. It is estimated that about 40% of female employment may be attributed to the "insider advantage". A political evaluation of some effects of wage measures is provided. It is found that, in addition to the manipulation of wages and wage costs, the supply of childcare facilities will have a considerable impact on female participation.

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