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Lock in and Switch: Asymmetric Information and New Product Diffusion

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  • Luis Cabral

Abstract

Much of the increase in female labour force participation in the post-war period has come from the entry of married women with young children. Accompanying this change has been a rise in cultural acceptance of maternal employment. We argue that the concurrent S shaped rise in maternal participation and its cultural acceptance comes from generations of women engaged in Bayesian learning about the effects of maternal employment on children. Each generation updates their parents' beliefs by observing the children of employed women. When few women participate in the labour force, most observations are uninformative and participation rises slowly. As information accumulates and the effects of labour force participation become less uncertain, more women participate, learning accelerates and labour force participation rises faster. As beliefs converge to the truth, participation flattens out. Survey data, wage data and participation data support our mechanism and distinguish it from alternative explanations.

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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 07-11.

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Date of creation: 2007
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Handle: RePEc:ste:nystbu:07-11

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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