Creator: Fogli, Alessandra and Veldkamp, Laura Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 386 Abstract:
In the last century, the evolution of female labor force participation has been S-shaped: It rose slowly at first, then quickly, and has leveled off recently. Central to this dramatic rise has been entry of women with young children. We argue that this S-shaped dynamic came from generations of women learning about the relative importance of nature (endowed ability) and nurture (time spent child-rearing) for children’s outcomes. Each generation updates their parents’ beliefs by observing the children of employed women. When few women participate in the labor force, most observations are uninformative and participation rises slowly. As information accumulates and the effects of labor force participation become less uncertain, more women participate, learning accelerates and labor force participation rises faster. As beliefs converge to the truth, participation flattens out. Survey data, wage data and participation data support our mechanism and distinguish it from alternative explanations.
Keyword: Preference formation, Labor supply, Female labor force participation, S-shaped learning, and Endogenous information diffusion Subject (JEL): J21 - Labor Force and Employment, Size, and Structure, R12 - Size and Spatial Distributions of Regional Economic Activity, N32 - Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: U.S.; Canada: 1913-, and Z13 - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification