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The Role of Labor and Marriage Markets, Preference Heterogeneity and the Welfare System in the Life Cycle Decisions of Black, Hispanic and White Women

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  • Michael P. Keane

    ()
    (Department of Economics, Yale University)

  • Kenneth I. Wolpin

    ()
    (Department of Economics, University of Pennsylvania)

Abstract

Using data from the NLSY79, we structurally estimate a dynamic model of the life cycle decisions of young women. The women make joint and sequential decisions about school attendance, work, marriage, fertility and welfare participation. We use the model to perform a set of counterfactual simulations designed to shed light on three questions: (1) How much of observed minority-majority differences in behavior can be attributed to differences in labor market opportunities, marriage market opportunities, and preference heterogeneity? (2) How does the welfare system interact with these factors to augment those differences? (3) How can new cohorts that grow up under the new welfare system (TANF) be expected to behave compared to older cohorts?

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 06-004.

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Length: 90 pages
Date of creation: 02 Jan 2006
Date of revision:
Handle: RePEc:pen:papers:06-004

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Keywords: female life cycle behavior; labor market opportunities; marriage market opportunities; public welfare;

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References

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  1. Hanming Fang & Dan Silverman, 2007. "Time-Inconsistency and Welfare Program Participation: Evidence from the NLSY," NBER Working Papers 13375, National Bureau of Economic Research, Inc.
  2. Robert G. Wood, 1995. "Marriage Rates and Marriageable Men: A Test of the Wilson Hypothesis," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 163-193.
  3. Shannon N. Seitz, 2002. "Accounting for Racial Differences in Marriage and Employment," Working Papers, Queen's University, Department of Economics 1009, Queen's University, Department of Economics.
  4. Hanming Fang & Michael P. Keane, 2004. "Assessing the Impact of Welfare Reform on Single Mothers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(1), pages 1-116.
  5. Robert M. Sauer & Michael P. Keane, 2004. "A Computationally Practical Simulation Estimation Algorithm for Dynamic Panel Data Models with Unobserved Endogenous State Variables," Econometric Society 2004 North American Summer Meetings, Econometric Society 136, Econometric Society.
  6. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(1), pages 47-74, January.
  7. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
  8. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(3), pages 535-60, June.
  9. Christopher A. Swann, 2005. "Welfare Reform When Recipients Are Forward-Looking," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
  10. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  11. Michael J. Brien, 1997. "Racial Differences in Marriage and the Role of Marriage Markets," Journal of Human Resources, University of Wisconsin Press, vol. 32(4), pages 741-778.
  12. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, Econometric Society, vol. 57(5), pages 995-1026, September.
  13. Van Der Klaauw, W., 1993. "Female Labor Supply and Marital Status Decisions: A Life Cycle Model," Working Papers, C.V. Starr Center for Applied Economics, New York University 93-23, C.V. Starr Center for Applied Economics, New York University.
  14. Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers, Federal Reserve Bank of Minneapolis 557, Federal Reserve Bank of Minneapolis.
  15. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1023-35, December.
  16. Keane, Michael P & Wolpin, Kenneth I, 1994. "The Solution and Estimation of Discrete Choice Dynamic Programming Models by Simulation and Interpolation: Monte Carlo Evidence," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 648-72, November.
  17. Keane, Michael, 1993. "Simulation estimation for panel data models with limited dependent variables," MPRA Paper 53029, University Library of Munich, Germany.
  18. Tülin Erdem, 1996. "A Dynamic Analysis of Market Structure Based on Panel Data," Marketing Science, INFORMS, INFORMS, vol. 15(4), pages 359-378.
  19. Mark R. Rosenzweig, 1999. "Welfare, Marital Prospects, and Nonmarital Childbearing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(S6), pages S3-S32, December.
  20. Miller, Robert A. & Sanders, Seth G., 1997. "Human capital development and welfare participation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 46(1), pages 1-43, June.
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Cited by:
  1. Michael Keane, 2012. "Income Taxation in a Life Cycle Model with Human Capital," Economics Series Working Papers 2012-W08, University of Oxford, Department of Economics.
  2. M. P. Keane & R. M. Sauer, 2008. "Implications of Classification Error for the Dynamics of Female Labor Supply," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp13_08, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  3. Michael P. Keane & Robert M. Sauer, 2009. "Classification Error in Dynamic Discrete Choice Models: Implications for Female Labor Supply Behavior," Econometrica, Econometric Society, Econometric Society, vol. 77(3), pages 975-991, 05.
  4. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2008. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Working Papers 14266, National Bureau of Economic Research, Inc.
  5. Fernández, Raquel & Wong, Joyce Cheng, 2011. "The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8627, C.E.P.R. Discussion Papers.
  6. Raquel Fernández & Joyce Cheng Wong, 2011. "The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work," NBER Working Papers 17508, National Bureau of Economic Research, Inc.
  7. Juan Pantano & Qi Li, 2013. "The Demographic Consequences of Gender Selection Technology," 2013 Meeting Papers, Society for Economic Dynamics 1161, Society for Economic Dynamics.
  8. Blau, David M. & van der Klaauw, Wilbert, 2010. "What Determines Family Structure?," IZA Discussion Papers 4912, Institute for the Study of Labor (IZA).
  9. Clement Joubert & Sekyu Choi, 2012. "The value of remarriage," 2012 Meeting Papers, Society for Economic Dynamics 1111, Society for Economic Dynamics.
  10. José Canals-Cerdá & Shiferaw Gurmu, 2008. "Premarital Birth Among Young Hispanic Women: Evidence from Semiparametric Competing Risks Analysis," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 36(4), pages 421-440, December.
  11. Zvi Eckstein, 2010. "Dynamic Female Labor Supply," 2010 Meeting Papers, Society for Economic Dynamics 223, Society for Economic Dynamics.
  12. Joyce Wong & Raquel Fernández, 2012. "The Disappearing Gender Gap: The impact of divorce, wages, and preferences on education and women's work," 2012 Meeting Papers, Society for Economic Dynamics 176, Society for Economic Dynamics.
  13. Keane, Michael P. & Todd, Petra E. & Wolpin, Kenneth I., 2011. "The Structural Estimation of Behavioral Models: Discrete Choice Dynamic Programming Methods and Applications," Handbook of Labor Economics, Elsevier, Elsevier.
  14. Slonimczyk, Fabian & Yurko, Anna, 2013. "Assessing the Impact of the Maternity Capital Policy in Russia Using a Dynamic Model of Fertility and Employment," IZA Discussion Papers 7705, Institute for the Study of Labor (IZA).
  15. Apps, Patricia & Mendolia, Silvia & Walker, Ian, 2013. "The impact of pre-school on adolescents’ outcomes: Evidence from a recent English cohort," Economics of Education Review, Elsevier, Elsevier, vol. 37(C), pages 183-199.
  16. Fernández, Raquel & Wong, Joyce Cheng, 2011. "The Disappearing Gender Gap: The Impact of Divorce, Wages, and Preferences on Education Choices and Women's Work," IZA Discussion Papers 6046, Institute for the Study of Labor (IZA).

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