Culture as Learning: The Evolution of Female Labor Force Participation over a Century

Married women’s labor force participation increased dramatically over the last century. Why this occurred has been the subject of much debate. This paper investigates the role of changes in culture arising from learning in generating this increase. To do so, it develops a dynamic model of culture in which individuals hold heterogeneous beliefs regarding the relative long-run payo¤s 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 payo¤s of working by observing (noisy) private and public signals. This process generically generates an S-shaped …gure for female labor force participation, which is what is found in the data. The S shape results from the dynamics of learning. I calibrate the model to several key statistics and show that it does a good job in replicating the quantitative evolution of female LFP in the US over the last 120 years. The model highlights a new dynamic role for changes in wages via their e¤ect on intergenerational learning. The calibration shows that this role was quantitatively important in several decades. JEL Nos.: J16, J21, Z1, D19. Keywords: female labor force participation; cultural transmission; preference formation; learning; S shape; social norms. yAn earlier version of the model and simulation in this paper were presented in my Marshall Lecture at the EEA, Vienna, August 2006. The slides for this presentation are available at http://homepages.nyu.edu/~rf2/Research/EEAslidesFinal.pdf (pp 48-52). I thank Liz Potamites for excellent research assistance, and Christophe Chamley, John Knowles, Oriana Bandiera, Gianluca Violante, Elisabeth Schulte, and George Tridimas for helpful comments. I also wish to thank seminar audiences at the LAEF "Households, Gender and Fertility" conference, the NY/Philadelphia feds. "Quantitative Macroeconomics" Workshop, the NBER Summer Institute, the Silvaplana Political Economy workshop, the "Family Behavior and the Aggregate Economy" SITE workshop, LACEA, and Columbia U. for many helpful remarks. Lastly, I thank the NSF for …nancial support and the Russell Sage Foundation for its hospitality.