What Happens to Wage Elasticities When We Strip Playometrics? Revisiting Married Women Labour Supply Model

Duo Qin, Sophie van Huellen and Qing-Chao Wang
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Qing-Chao Wang: Department of Economics, SOAS University of London, UK

No 190, Working Papers from Department of Economics, SOAS University of London, UK

Abstract: This paper sheds new light on the well-known phenomenon of dwindling wage elasticities for married women in the US over the recent decades. Results of a novel model experiment approach via sample data ordering unveil considerable heterogeneity across different wage groups. Yet surprisingly constant wage elasticity estimates are revealed within certain wage groups over time as well as across two widely used US data sources, the Current Population Survey (CPS) and the Panel Study of Income Dynamics (PSID). These findings refute the assumed presence of a single-valued aggregate wage elasticity for working wives. Although womenís responsiveness to wages remains largely unchanged over time, we find that the composition of working women into different wage groups has changed considerably, resulting in decreasing wage elasticity estimates at the aggregate level. All these findings were methodologically impossible to acquire had we not dismantled and discarded the stereotyped endogeneity-backed instrumental variable route, which hitherto blocked the way towards sample data ordering.

Keywords: labour supply wage elasticity; instrumental variable; selection bias; parameter stability (search for similar items in EconPapers)
JEL-codes: C18 C52 C55 J22 (search for similar items in EconPapers)
Pages: 50
Date: 2014-12
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Citations: View citations in EconPapers (2)

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