Changes in Women’s Hours of Market Work: The Effect of Changing Returns to Experience∗

Over the past several decades in the US, married women’s hours of market work increased significantly. I argue that changes in behavior by married women with children account for much of this change. In particular, the pattern of married women’s work hours over the life cycle has changed substantially. In the past, married women of childbearing age tended to specialize in childrearing and home production activities at the expense of engaging in market work. Now, they do not curb the hours worked on the market. What factors contribute to this change in behavior? In this paper, I focus on relative changes in returns to experience as an explanation. I quantitatively assess how these changes in returns to experience contributed to changes in married women’s life cycle profiles of hours worked. I build a life-cycle model with human capital accumulation and home production in which the basic unit of analysis is a married couple with children, and calibrate it using data from the 1970s and 1990s. I show that changes in returns to experience account for a large part of the observed change. Moreover, according to the model, the increase in returns to experience accounts for roughly half of the increase in the female/male wage ratio that is found in the data. I also show that a decline in the gender wage gap, holding returns to experience constant, cannot explain the change in the shape of women’s life cycle profiles. Although the focus of the analysis is the labor supply behavior of women, the model also makes predictions about the behavior of men that are consistent with the data. ∗I am grateful to Richard Rogerson for his guidance and support throughout this project. I also want to thank Victor Rios-Rull and Petra Todd for insightful comments. This paper also benefited from conversations with Valentina Corradi, Russel Cooper, Alessandra Fogli, Jhoannes Horner, and Fabrizio Perri.