Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size

Abstract

Although theoretical models of labor supply and the family are well developed there are few credible estimates of key empirical relationships in the work-family nexus. This study uses a new instrumental variable the sex composition of the first two births in families with at least two children to estimate the effect of additional children on parents labor supply [in the United States]. Instrumental variables estimates using the sex mix are substantial but smaller than the corresponding ordinary least squares (OLS) estimates. Moreover unlike the OLS estimates the female labor supply effects estimated using sex-mix instruments appear to be absent among more educated women and women with high-wage husbands. We also find that married women who have a third child reduce their labor supply by as much as women in the full sample while there is no relationship between wives child-bearing and husbands labor supply. (EXCERPT)