Working Paper: NBER ID: w0667
Authors: Yoram Weiss; Reuben Gronau
Abstract: The paper analyzes the joint determination of wives' earnings and labor force participation over the life cycle given the interruptions in wives' work careers. The interruptions affect the profitability of the investment in human capital, which in turn determines earnings. The earnings prospects feed back into the participation decision, namely, the decision whether and for how long to drop out of the labor force. The formal analysis compares the age-earnings profiles of persons who drop out of the labor force with those who do not during the pre- and post-interruption period. The comparison is carried out where interruptions are assumed to be exogenous and when they are endogenous. The effect of productivity at home, the initial stock of human capital and its rental value on the length of the interruption is investigated.
Keywords: Labor Force Participation; Earnings Growth; Human Capital; Gender Wage Gap; Wage Discrimination
JEL Codes: J31; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected interruptions in labor force participation (J22) | reduced earnings growth (O49) |
| interruptions (Y60) | immediate loss of earnings (J17) |
| interruptions (Y60) | hinder future investment in human capital (J24) |
| hinder future investment in human capital (J24) | lower earnings over time (J31) |
| length of interruptions (C41) | influenced by home productivity (D13) |
| length of interruptions (C41) | influenced by initial stock of human capital (J24) |
| wage discrimination (J71) | affects level of earnings (J31) |
| wage discrimination (J71) | affects patterns of investment (F21) |
| patterns of investment (G11) | influences earnings growth (O49) |