Profiles of Fertility, Labour Supply and Wages of Married Women: A Complete Life-Cycle Model

Abstract

Trends in fertility and female labor supply have changed dramatically since World War II. Fertility rates rose steadily from the 1940's until the early 1960's and thereafter declined, while female laborforce participation rates have continually grown since the 1950's. These 2 rates are closely linked. Labor supply and fertility decisions are also life-cycle decisions. In addition, wage and job prospects are related to job choice and in turn to fertility decisions. Labor supply, fertility, and wages are linked in an econometric model which takes into account the problems of heterogeneity of tastes, the problem of missing wage rates through nonworking, and the problem of simultaneous-equations bias. Past works are critiqued, mainly on the basis that few analyses recognize the interrelatedness of fertility and labor supply in any sense--static or dynamic. Nor do most researchers consider age-specific fertility equations in analyzing female labor supply. Moffitt's model is a beginning analysis of fertility and labor supply as a joint consumer-demand choice. Patterns of a couple's future consumption, wife's labor supply, and births are assumed to be planned at the beginning of marriage. These patterns depend on the constraints of budget, fertility, and of inverse production (the differing amounts of time it takes to care for a child as the child matures) as well as wage accumulation. Exogenous wealth and beginning wages are considered as well. This model does not account for a woman's work experience prior to marriage. According to the model, fertility rates rise in the 1st year of marriage and subsequently fall off. Employment rates drop off at an accelerating rate until the 6th year of marriage and then increase. A rise in wage level decreases the probability of birth and increases the probability ow working. Also, changes in fertility rates have more to do with wage changes than with a woman's cohort.