Inequality and Household Labor Supply

María José Prados and Stefania Albanesi

No 657, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: This paper accounts for the decline in the labor force participation of married women in the US since 1995. We first document that this phenomenon is mainly driven by a decline in participation of college women married to high earning men. We argue that the rise in skill premium and especially the rise in wages for highly qualified workers is a factor in this phenomenon. We develop a household model of labor supply in which the rise in wages for highly skilled male workers, in conjunction with the gender gap in wages, generates a negative wealth effect that discourages participation and reduces hours for their spouses. A version of the model that incorporates on the job learning/training endogenously generates the rise in gender wage gaps for high skill workers, which is also consistent with the US experience post 1995.

Date: 2011
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