Slowing Women’s Labor Force Participation: The Role of Income Inequality

Stefania Albanesi and Maria Jose Prados
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Maria Jose Prados: University of Southern California

No 2022-037, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: The entry of married women into the labor force and the rise in women's relative wages are amongst the most notable economic developments of the twentieth century. The growth in these indicators was particularly pronounced in the 1970s and 1980s, but it stalled since the early 1990s, especially for college graduates. In this paper, we argue that the discontinued growth in female labor supply and wages since the 1990s is a consequence of growing inequality. Our hypothesis is that the growth in top incomes for men generated a negative income effect on the labor supply of their spouses, which reduced their participation and wages. We show that the slowdown in participation and wage growth was concentrated among women married to highly educated and high income husbands, whose earnings grew dramatically over this period. We then develop a model of household labor supply with returns to experience that qualitatively reproduces this effect. A calibrated version of the model can account for a large fraction of the decline relative to trend in married women’s participation in 1995-2005 particularly for college women. The model can also account for the rise in the gender wage gap for college graduates relative to trend in the same period.

Keywords: married women; skill premium (search for similar items in EconPapers)
JEL-codes: E24 J20 J30 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-his
Note: FI
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Albane ... ce-participation.pdf First version, January 12, 2022 (application/pdf)

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