Changes in Women's Hours of Market Work: The Effect of Changing Returns to Experience ∗

Abstract

Over the past several decades in the US, married women's hours of market work increased significantly. I argue that changes in behavior by married women with children account for much of this change. Furthermore, the pattern of married women's work hours over the life cycle has changed substantially. In the past, married women of childbearing age specialized in childrearing activities. Now, they do not curb the hours worked on the market. What factors contribute to this change in behavior? I focus on relative changes in returns to experience as an explanation. The goal of my dissertation is twofold. First, I estimate the extent to which returns to experience have changed. Second, I use theory to assess the consequences of this increase for married women's hours of work over the life cycle. The first paper formulates a dynamic model with learning-by-doing human capital accumulation where individuals choose both their labor force participation and their labor supply. The optimal decision rules are used to implement a semiparametric estimator for the human capital production function that corrects for the selection and simultaneity bias arising in this context. The function is estimated separately by gender for the 1970s and for the 1990s. The estimations show that, over this time period, returns to experience increased within both gender groups, and that the increase was relatively larger for women than for men. The second paper builds a GE model with human capital accumulation and home production and quantitatively assesses how these changes in returns to experience contributed to changes in married women's life cycle profiles of hours worked. The model is calibrated using data from the 1970s and 1990s. I show that changes in returns to experience account for a large part of the observed change. Moreover, the increase in returns to experience accounts for roughly half of the increase in the female/male wage ratio found in the data. I also show that a decline in the gender wage gap cannot explain the change in the shape of women's profiles. The model also makes predictions about men's behavior that are consistent with the data.

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