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Slowing Women's Labor Force Participation: The Role of Income Inequality

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  • Stefania Albanesi
  • María José Prados

Abstract

The entry of married women into the labor force and the rise in women's relative wages are amongst the most notable economic developments of the twentieth century. The growth in these indicators was particularly pronounced in the 1970s and 1980s, but it stalled since the early 1990s, especially for college graduates. In this paper, we argue that the discontinued growth in female labor supply and wages since the 1990s is a consequence of growing inequality. Our hypothesis is that the growth in top incomes for men generated a negative income effect on the labor supply of their spouses, which reduced their participation and wages. We show that the slowdown in participation and wage growth was concentrated among women married to highly educated and high income husbands, whose earnings grew dramatically over this period. We then develop a model of household labor supply with returns to experience that qualitatively reproduces this effect. A calibrated version of the model can account for a large fraction of the decline relative to trend in married women's participation in 1995-2005 particularly for college women. The model can also account for the rise in the gender wage gap for college graduates relative to trend in the same period.

Suggested Citation

  • Stefania Albanesi & María José Prados, 2022. "Slowing Women's Labor Force Participation: The Role of Income Inequality," NBER Working Papers 29675, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:29675
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    Cited by:

    1. Stefania Albanesi & Aysegul Sahin, 2018. "The Gender Unemployment Gap," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 47-67, October.
    2. So Kubota, 2020. "The U.S. Child Care Crisis: Facts, Causes, and Policies," Working Papers 2008, Waseda University, Faculty of Political Science and Economics.
    3. Francisco Perez‐Arce & María J. Prados, 2021. "The Decline In The U.S. Labor Force Participation Rate: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 615-652, April.
    4. Stefania Albanesi & Aysegul Sahin, 2018. "The Gender Unemployment Gap," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 47-67, October.
    5. Zhu, Mengbing & Xing, Chunbing & Li, Yi, 2023. "Husbands' wages and married women's labor supply in urban China," China Economic Review, Elsevier, vol. 82(C).

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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