Intertemporal female labor force behavior in a developing country: what can we learn from a limited panel?

We analyze intertemporal labor market behavior of women in urban Guinea, West Africa using two distinct methodologies applicable to a short (2-year) panel. A multi-period multinomial logit model with random effects provides evidence of unobserved individual heterogeneity as a factor strongly affecting labor market sector choices over time. Results from simpler single period models that condition on prior sector choices are consistent with either heterogeneity or state dependence. Both approaches perform equally well in predicting individual labor market behavior conditional on past choices. In terms of observable characteristics, the estimates confirm the heterogeneous structure of the urban labor market: informal and formal employment appear to differ significantly in terms of skill requirements, compatibility with child care, and costs of entry.