Influence of fertility on women's participation in the labor market and their wages-the alternative cost of having a child

Joanna Cieciel and Andrzej Tomaszewski
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Joanna Cieciel: Department of Economics, University of Warsaw
Andrzej Tomaszewski: Department of Economics, University of Warsaw

No 10, German Stata Users' Group Meetings 2004 from Stata Users Group

Abstract: Children require not only financial expenditures but also expenditures of time; thus, the number of children and distribution of their births in time remains in conflict with the aspiration of parents after career and their quest for satisfactory work. Cost of child includes not only expenditures of parents on goods and services but also alternative costs of time devoted to bringing up children, resulting from a loss of the part or the whole of income due to having the child. This problem applies mainly to women, who despite social transformations and growing occupational activity continue to be main suppliers of time for children care. Maternity restrains a woman's possibilities in the labor market not only through reduction of hours that she can spend at work. She gets lower wages also because of a disturbed career and smaller mobility than a childless woman. A prolonged gap in occupational activity results as well in a decrease of the long-term ability to gaining income--it diminishes total net income obtained during the lifetime (fewer years in work). This entails lower savings for a retirement fund. This paper consists of empirical estimations of models of women's participation in labor market taking into account endogeneity of fertility, which are subsequently employed as a selection equation in Heckman model of influence of having children on mothers' wages. Thus, we attempt to assess the fraction of income lost by a woman who decided to have children. We employ a cross-sectional and panel-data model on household budgets in Poland and Germany. The data used in estimation are taken from a database created by the Consortium of Household Panels for European Socio-economic Research (CHER) with the exception of the cross-sectional model for Poland, which is estimated on a broader survey conducted by the Polish Central Statistical Office.

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