Econometric analysis of older of work using a copula and sample selection approach

Abstract

© 2014 by the Mathematical Association of Thailand. All rights reserved. This paper aims at a copula approach to a sample selection model to determine the factors affecting the labor force participation and working hours of older workers in Thailand. Several of the copula functions, such as the Gaussian, and Archimedean copulas are compared to the standard Heckman's method which is restricted to linear dependence. This paper demonstrates that the copula approach to the sample selection model, which allows for flexibility in dependence structure and relaxing the joint normality assumption, works in this context and performs better than the BVN (bivariate normal model) especially, the Frank (L–t)copula model. Furthermore, the results obtained show the presence of significant positive dependency of unobserved factors between two error terms, which implies that the selectivity bias exists and also that the unobserved factors that increase(decrease) the propensity to participate in the labor force of older workers also increase (decrease) the working hours. In addition, the policy recommendation is that the stakeholders should consider on having a program that can increase working hours of some worker groups such as female workers, or workers who are not single or workers who do not stay in the Bangkok province.