Dynamic Labour Force Participation of Married Women and Endogenous Work Experience.

This paper presents and estimates a dynamic model of married women's labor-force participations and fertility in which the effect of work experience on wages is explicitly taken into account. Because current participation alters future potential earnings, the investment return to work will be an important factor in the current work decision in any forward-looking behavioral model. The model is estimated using the National Longitudinal Survey's mature women's cohort. The authors use the estimates of their model to predict changes in the lifecycle patterns of employment due to changes in schooling, fertility, husband's income, and the magnitude of the experience effect on wages. They find that, although work experience increases the disutility of further work, the effect is overwhelmed by the positive effect of experience on wages, leading to persistence in the employment patterns of these women. In addition, they find that an increase in young children and in husband's income substantially reduces participation, while increased schooling has a powerful positive impact on participation. Copyright 1989 by The Review of Economic Studies Limited.