Female Employment and Fertility - The Effects of Rising Female Wages

a CEP Discussion Paper (No 1156 (July 2012)) by Christian Siegel (Centre for Economic Performance, London School of Economics and Political Science)

Abstract

Increases in female employment and falling fertility rates have often been linked to rising female wages. However, over the last 30 years the US total fertility rate has been fairly stable while female wages have continued to grow. Over the same period, we observe that women’s hours spent on housework have declined, but men’s have increased.

I propose a model with a shrinking gender wage gap that can capture these trends.

While rising relative wages tend to increase women’s labour supply and, due to higher opportunity cost, lower fertility, they also lead to a partial reallocation of home production from women to men, and a higher use of labour-saving inputs into home production.

I find that both these trends are important in understanding why fertility did not decline to even lower levels. As the gender wage gap declines, a father’s time at home becomes more important for raising children.

When the disutilities from working in the market and at home are imperfect substitutes, fertility can stabilize, after an initial decline, in times of increasing female market labour. That parents can acquire more market inputs into child care is what I find important in matching the timing of fertility. In a mode l extension, I show that the results are robust to intrahousehold bargaining.

JEL Classifications: D13, E24, J13, J22

Full text (PDF 56pp)

See also: Clash of Career and Family: fertility decisions after job displacement

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