Estimating effort function with semiparametric model

The method of penalized least squares with partial splines is introduced to estimate the representative worker’s unobserved effort function e(w). The data used is a cross-sectional sample from Finnish industry in the year 1991. Well-defined estimates are obtained using a partially linear labour demand model. Wage depended non-linearities in labour demand curve are identified with estimated effort function. The small sample distributions of conducted specifications tests are derived with bootstrap methods. A GAUSS 3.2. program for semiparametric estimation is included.