Children and Women’s Participation Dynamics: Direct and Indirect Effects

Children and Women’s Participation Dynamics: Direct and Indirect Effects Children affect the after-birth labor force participation of women in two ways. Directly, the time spent in child-care reduces the labor market effort. Time spent out of the labor market while on maternity leave alters women’s participation experience and indirectly affects subsequent participation behavior. This paper proposes a model that disentangles the direct and indirect effect of children on women’s labor force participation, and evaluates their relative importance. Distinguishing these two effects is important for effective policy design. Participation decisions for three levels of labor market involvement are represented by a multivariate probit model. The estimation is performed using Markov chain Monte Carlo methods. The indirect effect is more important and grows with the length of the interruption. The direct effect wanes with the age of the child. JEL Classification: C11, C15, J13, J22