Abstract
We estimate the effect of family size on various measures of labor market outcomes over the whole career until retirement, using instrumental variables estimation in data from Norwegian administrative registers. Parents’ number of children is instrumented with the sex mix of their first two children. We find that having additional children causes sizable reductions in labor supply for women, which fade as children mature and even turn positive for women without a college degree. Among women with a college degree, there is evidence of persistent and even increasing career penalties of family size. Having additional children reduces these women’s probability of being employed by higher-paying firms, their earnings rank within the employing firm, and their probability of being the top earner at the workplace. Some of the career effects persist long after labor supply is restored. We find no effect of family size on any of men’s labor market outcomes in either the short or long run.
Highlights
Parenthood is a major cause of reduced labor supply for women
We study the effect of an increase in family size on labor supply and on career outcomes, such as earnings rank and the probability of being the top earner at the workplace
Many of the career outcomes that we investigate in this study are related to aspects of the firm, and a fourth contribution of our study is to bring instrumental variable (IV) evidence on how childbearing affects both in what type of firm women are employed as well as their relative position within this firm
Summary
Parenthood is a major cause of reduced labor supply for women. It is a likely candidate for explaining the persisting career gap between women and men. We aim to estimate the effect of family size on a comprehensive set of labor supply and career measures in both the short and the long run. We study the effect of an increase in family size on labor supply (income, labor force participation, and weekly work hours) and on career outcomes, such as earnings rank (of both the individual and her firm) and the probability of being the top earner at the workplace. A main contribution of this study is to estimate labor supply effects over the whole working life—that is, for 40 years after the birth of a second child. We contribute to the IV literature on children and labor market outcomes by studying how childbearing affects women’s relative position in the labor market, both in the short and in the long run. We use the same samples for the OLS and IV estimations throughout the study
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