A quantitative theory of the new life cycle of women's employment

Abstract

“A new life cycle of women's labor force participation has emerged” (Goldin and Mitchell, 2017). Compared to previous cohorts, the employment profile of American college-educated married women born after the mid-1950s is flatter and higher with no hump but with a dip in the middle between ages 30-39. At the same time, these younger cohorts have delayed births, but their completed fertility rate has increased. I develop a quantitative theory to explain the changes in college-educated women's employment and fertility decisions across cohorts. First, I provide reduced-form evidence of a positive correlation between fertility and employment decisions. Second, I build a life-cycle model of labor supply and fertility decisions. My estimates indicate that the marginal returns to experience of college-educated married women increased by 33 percent. Although on-the-job accumulation of experience plays a crucial role in generating employment shifts and birth delays, the model does not generate an increase in the total fertility rate in the absence of infertility treatments. Thus, to understand why college-educated married women's life-cycle employment profiles and fertility decisions are changing, both factors must be considered.