where is the average of the log of working hours per week of age group a in cohort
k with education level j, and similarly for the other terms in this equation. The control variables
differ across specifications and include:
(1) Age effects (fa or age dummies),
(2) Cohort effects (fc or cohort dummies),
(3) Education effects (or the education level dummies)
(4) The business cycle effect (or the average annual change of real GDP for that cohort)
(5) Demographic factors (marital status and living areas, both as cohort averages)
The key parameter of interest is , the coefficient on the logarithm of weekly earnings,
which is the wage elasticity of labor supply for the hours-worked equation. In addition, to
investigate the extensive margin of labor supply, the employment-population ratio (E_P) and
working hours-population ratio (H_P) are alternative dependent variables.