Economic Development and the Motherhood Wage Penalty

We investigate whether the motherhood wage penalty varies by level of economic development. Using data from 21 middle- and low-income countries that have a common questionnaire, we find that the penalty increases with economic development. To address differential selection into motherhood, we instrument for the number of children with infertility shocks and continue to find that motherhood wage penalty raises with economic development. We explore two possible explanations for this increase. First, while the penalty for young children is similar across levels of development, in low-income countries adolescent children generate a premium. This reflects the role that adolescent children, especially daughters, play as substitutes for their mother’s time in household tasks in poorer countries. Second, as labor markets become more complex, employment type and occupational segregation account for more of the motherhood wage penalty. Labor market variables account for very little of the family penalty in low-income countries but they explain around one-third of the penalty in middle-income countries.