December 3, 2005
Kyoo-il Kim and José Carlos Rodríguez-Pueblita
Applying several estimation procedures to the Panel Study of Income Dynamics, we find that labor supply elasticities with respect to own wages and to other household members’ income for married white women have decreased significantly in absolute terms during the 1983-2000 period. The elasticities with respect to after-tax wages are statistically either not different from zero or negative, while the elasticities with respect to other household members’ income are negative, significant, and relatively stable for much of the period. Our results are robust and consistent across models and specifications. These findings suggest an important change in the labor supply behavior of married women, revealing that younger females today are not behaving like younger females in the past. We informally explore several possible explanations to this phenomenon: changes in the intrahousehold resource allocation and in turnover rates for younger cohorts. These institutional adjustments, together with the increasing portion of younger females in the labor force pool, might explain the empirical findings of our study.