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Job matching, family gap and fertility choice

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  • Chang, Chia-Ying
  • Laing, Derek
  • Wang, Ping

Abstract

This paper concentrates on the role of job matching frictions in influencing the interactions between fertility choice and wage offers and show that job market frictions are a crucial factor in wage differentials among female workers. The goals of this paper are to examine how the home-stay alternative and asymmetric market frictions influence this wage differential and whether the well documented negative correlation between fertility choice and female earnings still holds in the face of life-cycle choices. To address these questions, we develop a search-theoretic model that incorporates fertility and job decisions and assume that the workers with children face a lower job matching rate and a higher job quitting rate relative to the rates faced by the workers without children. As a result, we find that a wider wage differential is associated with more asymmetric market frictions and that the wage differential has a positive effect from output differential, a positive scale effect from the output of mothers and a negative effect from the utility from staying home. The wage differential is positively correlated with both fertility and home-stay rates and negatively correlated with market thickness and matching technology. Furthermore, by having both fertility and home-stay choices endogenously determined, we can show that a tighter market will enhance the fertility rate and the home-stay rate and a better job matching technology would not only increase the home-stay rate but decrease the fertility rate. In general equilibrium, the effects of both market tightness and the matching technology on the wage differential are indeterminate. These results indicate that the home-stay choice actually gives workers with children not only an alternative but also the power to negotiate higher wages. This shrinks the wage differential. Finally, the result that a higher fertility rate enlarges the wage differential also implies a negative relationship between the fertility rate and the earnings of workers with children. This result is consistent with standard empirical findings.

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File URL: http://researcharchive.vuw.ac.nz/handle/10063/2069
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Bibliographic Info

Paper provided by Victoria University of Wellington, School of Economics and Finance in its series Working Paper Series with number 2069.

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Date of creation: 2012
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Handle: RePEc:vuw:vuwecf:2069

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Postal: Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand
Phone: +64 (4) 463-5353
Fax: +64 (4) 463-5014
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Web page: http://www.victoria.ac.nz/sef
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Related research

Keywords: job search; female labor participation; fertility choice;

This paper has been announced in the following NEP Reports:

References

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  1. Catalina Amuedo-Dorantes & Jean Kimmel, 2004. "The Motherhood Wage Gap for Women in the United States: The Importance of College and Fertility Delay," Economic Working Papers at Centro de Estudios Andaluces E2004/07, Centro de Estudios Andaluces.
  2. José María Da Rocha & Luisa Fuster, 2006. "Why Are Fertility Rates And Female Employment Ratios Positively Correlated Across O.E.C.D. Countries?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1187-1222, November.
  3. Pedro Mira & Namkee Ahn, 2002. "A note on the changing relationship between fertility and female employment rates in developed countries," Journal of Population Economics, Springer, vol. 15(4), pages 667-682.
  4. Alícia Adserà, 2004. "Changing fertility rates in developed countries. The impact of labor market institutions," Journal of Population Economics, Springer, vol. 17(1), pages 17-43, February.
  5. Waldfogel, Jane, 1995. "The Price of Motherhood: Family Status and Women's Pay in a Young British Cohort," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 584-610, October.
  6. Waldfogel, Jane, 1998. "The Family Gap for Young Women in the United States and Britain: Can Maternity Leave Make a Difference?," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 505-45, July.
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