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Household Interaction and the Labor Supply of Married Women

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  • Zvi Eckstein

    (Tel Aviv University)

Abstract

The major increase in the employment rate of married women while that of men remained almost unchanged is one of the most dramatic socioeconomic changes to have taken place during the last century. In this paper, we argue that shifts in social norms regarding household interaction in determining a married couple’s labor supply can provide an explanation. Specifically, we formulate and estimate a dynamic discrete-choice labor supply model, assuming that there are two types of households – Classical and Modern. The Classical household follows a Stackelberg leader game in which the wife’s labor supply decision follows her husband’s already-known employment outcome. The Modern family is characterized by a symmetric and simultaneous game that determines their joint labor supply and has a Nash equilibrium. The family type – Modern or Classical – is exogenously determined when the couple gets married but is not observable for estimation. The model is estimated using the Simulated Moments Method (SMM) and data from the Panel Study of Income Dynamics (PSID) survey for the years 1983-93. The estimated model accurately predicts employment rates and produces a good fit of mean wages to the data. We estimate that 38 percent of families are Modern and that the participation rate of women in those households is almost 80 percent. The employment rate of women in Classical families is 10 percent lower than that while the employment rates of men is almost identical in the two household types. These results support our hypothesis that part of the increase in labor supply of married women may be due to an increase in the share of Modern families in the population.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 18.

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Date of creation: 2012
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Handle: RePEc:red:sed012:18

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  1. Eckstein, Zvi & Lifshitz, Osnat, 2009. "Dynamic Female Labor Supply," CEPR Discussion Papers 7548, C.E.P.R. Discussion Papers.
  2. repec:hal:cesptp:halshs-00639313 is not listed on IDEAS
  3. Chiappori, Pierre-Andre, 1997. "Introducing Household Production in Collective Models of Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 191-209, February.
  4. Becker, Gary S, 1974. "A Theory of Marriage: Part II," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S11-S26, Part II, .
  5. Eckstein, Zvi & Wolpin, Kenneth I, 1989. "Dynamic Labour Force Participation of Married Women and Endogenous Work Experience," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 375-90, July.
  6. Nicholas Jacquemet & Jean-Marc Robin, 2011. "Marriage with Labor Supply," 2011 Meeting Papers 446, Society for Economic Dynamics.
  7. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
  8. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-49, June.
  9. Hotz, V Joseph & Miller, Robert A, 1988. "An Empirical Analysis of Life Cycle Fertility and Female Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 91-118, January.
  10. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  11. Mary T. Coleman & John Pencavel, 1993. "Trends in market work behavior of women since 1940," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(4), pages 653-676, July.
  12. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  13. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 47-74, January.
  14. Heckman, James J. & Singer, Burton, 1984. "Econometric duration analysis," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 63-132.
  15. Raquel Fernandez, 2007. "Culture as Learning: The Evolution of Female Labor Force Participation over a Century," NBER Working Papers 13373, National Bureau of Economic Research, Inc.
  16. Sebastien Buttet & Alice Schoonbroodt, 2005. "Fertility and Female Employment: a Different View of the Last 50 Years," 2005 Meeting Papers 870, Society for Economic Dynamics.
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