Two Birds with One Stone: Female Labor Supply, Fertility, and Market Childcare
نویسندگان
چکیده
The correlation between female labor force participation rate (FPR) and total fertility rate (TFR) across developed countries has switched from negative to positive. This paper provides a structural explanation of the historical pattern via changes in substitutability between mother’s direct childcare and indirect market care. Analysis of a life-cycle model of married women’s labor supply and fertility shows that FPR increases, whereas TFR is U-shaped with regards to substitutability. The dynamic relationship between FPR and TFR depends on the relative strength of behavioral and composition effects: greater childcare substitutability allows working women to have more children but it also attracts less productive women to enter the labor force, who trade childbirths for labor supply. The findings imply that raising substitutability to a sufficiently high level can achieve two seemingly conflicting goals—increasing female labor supply and fertility rate. JEL Codes: J11, J13, J22, D10
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