The Role of Fertility in Gender Differences in Labor Market Outcomes

We develop a quantitative theory of gender differences in labor market participation, hours worked, labor turnover, and human capital accumulation. In our theory, young females expect to face higher labor turnover and to work less hours than males because they allocate time to child rearing. As a result, females have less incentives than males to exert effort in accumulating human capital on the job which, in turn, affects labor market participation decisions. We calibrate our model to the U.S. economy and perform two experiments. First, we assume an exogenous reduction in the time allocated by females to child rearing activities which leads to an increase in the labor supply of females relative to males. Our goal is to evaluate how changes in female labor market participation can account for the reduction in the gender wage gap in the U.S. during the period 1950-1990. Second, we study the consequences of parental leave policies on fertility decisions and gender differences in employment and wages.