As noted in Chapter 3, the results of first-generation empirical studies of static labor supply models were somewhat disappointing. First, at times they provided only weak evidence in support of certain basic theoretical notions underlying the simple static model. Second, they appeared to provide evidence against certain other propositions underlying that model. Third, the range of estimates yielded by such studies was too wide to be of much use for purposes of analysis or policy. In principle, one could react in two different (but not mutually exclusive) ways to this body of work. On the one hand, one might conclude that the simple static labor supply model is inadequate and proceed to develop and analyze more elaborate models. On the other hand, one might also (or instead) conclude that the simple techniques used in first-generation work were not well suited to analysis of even the simple labor supply model and proceed to develop and use more elaborate empirical techniques.

These concerns have fostered a growing body of “secondgeneration” labor supply research. This literature differs from first-generation work in several respects: specification, estimation technique, and the range of models considered.

1. Specification. First-generation empirical studies were chiefly concerned with estimating the parameters of ad hoc labor supply functions, such as (3.19)–(3.21), that were not derived from a formal model of utility maximization subject to constraints. Different aspects of labor supply (e.g., participation vs. hours of work) were dealt with in a piecemeal manner.