Relative Cohort Size, Relative Income, and Women's Labor Force Participation 1968-2010

Diane J. Macunovich ()
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Diane J. Macunovich: University of Redlands

No 5913, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Relative cohort size – the ratio of young to prime-age adults – and relative income – the income of young adults relative to their material aspirations, as instrumented using the income of older families their parents' age – have experienced dramatic changes over the past 40 years. Relative cohort size has been shown to cause a decline in men's relative wages – the wages of young relative to prime-age workers – due to imperfect substitutability, and the results here show that this applies perhaps even more strongly to women's relative – and absolute – starting wage. Relative cohort size first declined by 30% and then increased by 47%. Results here show that those changes explain about 60% of the declines in women's starting wage – both relative and absolute – in the first period, and 100% of its increase in the second. Relative income is hypothesized to affect a number of demographic choices by young adults, including marriage, fertility and female labor force participation, as young people strive to achieve their desired standard of living. Older family income – the denominator in a relative income variable – increased by 58.6% between 1968 and 2000, and then declined by 9%. Its changes explain 66% of the increase in the labor force participation of women in their first five years out of school between 1968 and 2000, and 75% of its decline thereafter. The study makes use of individual-level measures of labor force participation, with instrumented wages, and employs the lagged income of older families in a woman’s year-state-race-education group to instrument parental income and hence material aspirations.

Keywords: relative cohort size; relative income; women's labor force participation; sex ratio; women's hours worked (search for similar items in EconPapers)
JEL-codes: J22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-08
New Economics Papers: this item is included in nep-age, nep-dem, nep-lab and nep-lma
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Published - published as 'Relative Cohort Size, Relative Income, and Married Women's Labor Force Participation: United States, 1968–2010' in: Population and Development Review, 2012, 38 (4), 631-648

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