Culture as Learning: The Evolution of Female Labor Force Participation over a Century, Most Recent Version: November 2007 (small modifications over August revision)
Women’s labor force participation has increased dramatically over the last century. Why this has occurred has been the subject of much debate. This paper investigates the role of culture as learning in this change. To do so, it develops a dynamic model of culture in which individuals hold heterogeneous beliefs regarding the relative long-run payoffs for women who work in the market versus the home. These beliefs evolve rationally via an intergenerational learning process. Women are assumed to learn about the long-term payoffs of working by observing (noisy) private and public signals. They then make a work decision. This process generically generates an S-shaped figure for female labor force participation, which is what is found in the data. The S shape results from the dynamics of learning. When either small or large proportions of women work, learning is very slow and the changes in female labor force participation are also small. When the proportion of women working is close to 50%, rapid learning and rapid changes in female LFP take place. I calibrate the model to several key statistics and show that it does a very good job in replicating the quantitative evolution of female labor force participation in the US over the last 120 years. The model highlights a new dynamic role for changes in wages via their effect on intergenerational learning. The calibration shows that this role was quantitatively important in several decades.An early version of the model and a simulation were presented in my Marshall Lecture at the EEA, August 2006. The slides for this presentation are below.
Slides from Marshall Lecture Presentation, August 2006.
These are the slides I presented for the Marshall Lecture, EEA, Vienna, August 2006. They discuss the epidemiological approach as a way to separate the effect of institutions and other traditional economic variables from culture; they summarize research on the effect of culture on the work behavior of women; they introduce a model of culture as learning to explain the evolution of US female LFP over a century and show a simulation; lastly, they discuss open research questions.For a discussion of the epidemiological approach, see the Palgrave Dictionary article (Fernández 2007). For the research on women and work see Culture: An Empirical Investigation of Beliefs, Work, and Fertility (Fernández and Fogli 2007) and Women, Work and Culture (Fernández 2007). The latter paper contains much of the material presented in these slides. It also introduces new evidence on culture and women's work based on answers to WVS questions about attitudes towards women across European countries using an epidemiological approach. Lastly, a quantitative model of culture as learning, along the lines sketched in the slides, is developed in Culture as Learning: The Evolution of Female Labor Force Participation over a Century (Fernández 2007).
Culture and Economics, New Palgrave Dictionary of Economics, 2nd edition, forthcoming, 2007.
Culture: An Empirical Investigation of Beliefs,
Work, and Fertility with A. Fogli, January 2007, Most Recent Version
We study the effect of culture on economic outcomes by examining the work and fertility behavior of second-generation American women. We instrument culture with past female labor force participation and total fertility rates from the woman's country of ancestry. These variables should capture, in addition to past economic and institutional conditions, the preferences and beliefs commonly held about women's role and ideal family size. Given the different time and place, only the preferences and beliefs embodied in the cultural proxies should be potentially relevant to women's work and fertility behavior. We show that the cultural proxies have positive and significant explanatory power for individual work and fertility outcomes, even after controlling for possible indirect effects of culture (e.g., education and spousal characteristics). We examine alternative hypotheses for these positive correlations and show that unobserved human capital, at the individual level or embodied in the ethnic network, is not likely to be responsible. We also show that the effect of culture is amplified for ethnic groups that tend to cluster in the same neighborhoods.
Diversity and Redistribution with G. Levy, December 2007, Forthcoming, Journal of Public Economics
In this paper we analyze the interaction of income and preference heterogeneity in a political economy framework. We ask whether the presence of preference heterogeneity (arising, for example, from different ethnic groups or geographic locations) affects the ability of the poor to extract resources from the rich. We study the equilibrium of a game in which coalitions of individuals form parties, parties propose platforms, and all individuals vote, with the winning policy chosen by plurality. Political parties are restricted to offering platforms that are credible (in that they belong to the Pareto set of their members). The platforms specify the values of two policy tools: a general redistributive tax which is lumpsum rebated (or used to fund a general public good) and a series of taxes whose revenue is used to fund specific (targeted) goods tailored to particular preferences or localities. Our analysis demonstrates that taste conflict first dilutes but later reinforces class interests. When the degree of taste diversity is low, the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers. As taste diversity increases in society, the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution. As diversity increases further, however, the only policy that can emerge supports exclusively general redistribution.
Women, Work, and Culture, Journal of the European Economic Association, 2007, 5(2-3), 305-332.
This paper discusses some recent advances in the area of culture and economics and examines the effect of culture on a key economic outcome: female labor supply. To separate the effect of market variables and institutions from culture, I use an epidemiological approach, studying second-generation American women. I use both female LFP and attitudes in the women’s country of ancestry as cultural proxies and show that both cultural proxies have quantitatively significant effects on women’s work outcomes. The paper concludes with some suggestions for future empirical and theoretical research topics in this area.
Fertility: The Role of Culture and Family Experience with A. Fogli
Published in Journal of the European Economic Association, 2006
This paper attempts to disentangle the direct effects of experience from those of culture in determining fertility. We use the GSS to examine the fertility of women born in the US but from different ethnic backgrounds. We take lagged values of the total fertility rate in the woman’s country of ancestry as the cultural proxy and use the woman’s number of siblings to capture her direct family experience. We find that both variables are significant determinants of fertility, even after controlling for several individual and family-level characteristics.
Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality
with N. Guner and J. Knowles
Published in Quarterly Journal of Economics, 2005
This paper examines the interactions between household formation, inequality, and per capita income. We develop a model in which agents decide to become skilled or unskilled and form households. We show that the equilibrium sorting of spouses by skill type (their correlation in skills) is an increasing function of the skill premium. In the absence of perfect capital markets, the economy can converge to different steady states, depending upon initial conditions. The degree of marital sorting and wage inequality is positively correlated across steady states and negatively correlated with per capita income. We use household surveys from 34 countries to construct several measures of the skill premium and of the degree of correlation of spouses’ education (marital sorting). For all our measures, we find a positive and significant relationship between the two variables. We also find that sorting and per capita GDP are negatively correlated and that greater discrimination against women leads to more sorting, in line with the predictions of our model.
Mothers and Sons: Preference Formation and Female Labor Force Dynamics
with A. Fogli and C. Olivetti
This paper contains material from both "Marrying your Mom" and "Preference Formation" (see above)
Published in Quarterly Journal of Economics, 2004
This paper argues that the growing presence of a new type of man–one brought up in a family in which the mother worked–has been a significant factor in the increase in female labor force participation over time. We present cross-sectional evidence showing that the wives of men whose mothers worked are themselves significantly more likely to work. We use variation in the importance of WWII as a shock to women’s labor force participation–as proxied by variation in the male draft rate across US states–to provide evidence in support of the intergenerational consequences of our propagation mechanism.
Equity and Resources: An Analysis of Education Finance Systems
with R. Rogerson
Published in Journal of Political Economy, 2003
We analyze five education finance systems: local, State, foundation, power equalizing with recapture (PER) and power equalizing without recapture (PEN). In a calibrated model, we find that finance systems have large effects on educational resources and equity. The trade-off between equity and resources, however, is not monotone. Ranking systems by expected utility, we find that PER consistently ranks highest, though it provides fewer resources to education than the foundation and PEN systems, and is less equitable than a state system. We prove that for an important subset of preferences, PER will win in majority voting comparisons with the other systems.
Household Formation, Inequality, and the Macroeconomy
Published in Journal of the European Economic Association, 2003
This paper examines how family structure can influence the macroeconomy. It uses a simple model where the key features are taken as exogenous and shows that the sorting of individuals into families can have important quantitative effects on human capital formation, inequality and income. It then discusses how these features can be endogenized and suggests avenues for future research.
School Vouchers as a Redistributive Device: An Analysis of Three Alternative Systems
with Richard Rogerson
Published in The Economics of School Choice, 2003
Education, Segregation, and Marital Sorting: Theory and Application to the UK
Published in European Economic Review, 2002
This paper presents a model of the intergenerational transmission of education and marital sorting. Parents matter both because of their household income and because their human capital determines the distribution of a child’s disutility from making an effort to become skilled. We show that an increase in segregation has potentially ambiguous effects on the proportion of individuals that become skilled in the steady state, and hence on marital sorting, the personal and household income distribution, and welfare. We calibrate the steady-state of our model to UK statistics We find that an increase in the correlation of spouses in their years of education will bring about a small increase in the proportion of skilled individuals when the relative supply of skilled individuals is variable at the family level and a decrease when this supply is fixed. Ex ante utility (of an unborn individual) increases in the first case and decreases in the second. The welfare effect of increased sorting is negative for unskilled individuals and positive for skilled individuals. Increased segregation always leads to an increase in welfare inequality between skilled and unskilled individuals.
Sorting and Long-Run Inequality
with R. Rogerson
Published in Quarterly Journal of Economics, 2001
Many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality. To investigate this, we construct a dynamic model of intergenerational education acquisition, fertility and marital sorting and parameterize the steady state to match several basic empirical findings. We find that increased sorting will significantly increase income inequality. Four factors are important to our findings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children’s years of education, wages that are sensitive to the relative supply of skilled workers, and borrowing constraints that affect educational attainment for some low income households.
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