DP6324 Nature or Nurture? Learning and Female Labour Force Dynamics

Author(s): Alessandra Fogli , Laura Veldkamp

Publication Date: June 2007

Keyword(s): female labour force participation , information diffusion , labor supply , preference transmission , S-shaped learning

JEL(s): E2 , J21 , N32 , Z1

Programme Areas: Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP6324.asp.asp

Much of the increase in female labour force participation in the post-war period has come from the entry of married women with young children. Accompanying this change has been a rise in cultural acceptance of maternal employment. We argue that the concurrent S shaped rise in maternal participation and its cultural acceptance comes from generations of women engaged in Bayesian learning about the effects of maternal employment on children. Each generation updates their parents' beliefs by observing the children of employed women. When few women participate in the labour force, most observations are uninformative and participation rises slowly. As information accumulates and the effects of labour force participation become less uncertain, more women participate, learning accelerates and labour force participation rises faster. As beliefs converge to the truth, participation flattens out. Survey data, wage data and participation data support our mechanism and distinguish it from alternative explanations.