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Relative Income Concerns and the Rise in Married Women's Employment

Listed author(s):
  • David Neumark
  • Andrew Postlewaite

We ask whether women's decisions to be in the labor force may be affected by the decisions of other women in ways not captured by standard models. We develop a model that augments the simple neoclassical framework by introducing relative income concerns into women's (or families') utility functions. In this model, the entry of some women into paid employment can spur the entry of other women, independently of wage and income effects. This mechanism may help to explain why, over some periods, women's employment appeared to rise faster than could be accounted for by the simple neoclassical model. We test the model by asking whether women's decisions to seek paid employment depend on the employment decisions of other women with whom relative income comparisons might be important. In particular, we look at the effects of sisters' employment on women's own employment. We find strong evidence that women's employment decisions are positively related to their sisters' employment decisions. We also take account of the possibility that this positive relationship arises from heterogeneity across families in unobserved variables affecting the employment decision. We conduct numerous empirical analyses to reduce or eliminate this heterogeneity bias. We also look at the relationship between husbands' relative income and wives' employment decisions. In our view, the evidence is largely supportive of the relative income hypothesis.

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File URL: http://www.nber.org/papers/w5044.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5044.

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Date of creation: Feb 1995
Publication status: published as Journal of Public Economics, Vol. 70, no. 1 (October 1998): 157-183.
Handle: RePEc:nbr:nberwo:5044
Note: LS
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  1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, vol. 70(1), pages 157-183, October.
  2. Arline Geronimus & Sanders Korenman, 1993. "The socioeconomic costs of teenage childbearing: Evidence and interpretation," Demography, Springer;Population Association of America (PAA), vol. 30(2), pages 281-290, May.
  3. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, June.
  4. Saul Hoffman & E. Foster & Frank Furstenberg, 1993. "Reevaluating the costs of teenage childbearing: Response to Geronimus and Korenman," Demography, Springer;Population Association of America (PAA), vol. 30(2), pages 291-296, May.
  5. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
  6. Goldin, Claudia, 1992. "Understanding the Gender Gap: An Economic History of American Women," OUP Catalogue, Oxford University Press, number 9780195072709.
  7. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
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  10. Jacob Mincer, 1962. "Labor Force Participation of Married Women: A Study of Labor Supply," NBER Chapters,in: Aspects of Labor Economics, pages 63-105 National Bureau of Economic Research, Inc.
  11. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  12. Goldin, Claudia D, 1991. "The Role of World War II in the Rise of Women's Employment," American Economic Review, American Economic Association, vol. 81(4), pages 741-756, September.
  13. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  14. Claudia Goldin, 1994. "The U-Shaped Female Labor Force Function in Economic Development and Economic History," NBER Working Papers 4707, National Bureau of Economic Research, Inc.
  15. Blackburn, McKinley L & Bloom, David E & Neumark, David, 1993. "Fertility Timing, Wages, and Human Capital," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(1), pages 1-30.
  16. Smith, James P & Ward, Michael P, 1985. "Time-Series Growth in the Female Labor Force," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 59-90, January.
  17. Behrman, Jere R & Rosenzweig, Mark R & Taubman, Paul, 1994. "Endowments and the Allocation of Schooling in the Family and in the Marriage Market: The Twins Experiment," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1131-1174, December.
  18. repec:hrv:faseco:30703972 is not listed on IDEAS
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