The Economics of The Family - · PDF fileThe Economics of The Family Dr Abigail Adams ......
Transcript of The Economics of The Family - · PDF fileThe Economics of The Family Dr Abigail Adams ......
Introduction Motivation Housekeeping Topics Facts Gains
The Economics of The Family
Dr Abigail Adams
Spring 2016
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Outline for Today
I Motivation
II Housekeeping
III Topic Overview
IV Key Changes
V Goldin’s Phases
VI Gains to Household Formation
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Why are economists interested?
I Policy
II Empirics
III Theory
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Outline for Today
I Motivation
II Housekeeping & Topic Overview
III Key Changes
IV Goldin’s Phases
V Gains to Household Formation
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Course Structure
I Class participation (10%)
II Problem set (15%)
III Research proposal (75%)
i Question identification (10%)
ii Mid-term draft (25%)
iii Final proposal inc. preliminary analysis (40%)
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Topics
I Family/Group decision making
II Household formation & Divorce
III Family structure & Children
IV Women in the labour market
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Topics- Family/Group Decision Making
i What happens withinexisting unions?
ii Cooperative v.noncooperative
iii Degree of commitment
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Topics- Household formation & divorce
i Who marries whom?
ii Explaining rise in divorce
iii Influence on what happensin existing unions
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Topics- Family structure & children
i Modelling children and thechoice to have children
ii Cross country differences
iii Birth control
iv Child investment & old agecare
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Topics - Women in the labour market
i Choice between home andmarket work
ii Discrimination
iii Workplace change
iv Higher education
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Outline for Today
I Motivation
II Housekeeping
III Key Changes
IV Goldin’s Phases
V Gains to Household Formation
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Marriage & Divorce
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Marriage & Divorce
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Marriage & Divorce
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Time Spent in Marriage
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Heterogeneity
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Children
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Fertility Rate
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Labour Force Participation
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Wage Gap
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Outline for Today
I Motivation
II Housekeeping
III Key Changes
IV Goldin’s Phases
V Gains to Household Formation
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Goldin posits four distinct phases to women’s increasedinvolvement in the US economy.
II Distinguished between according to horizon, identity, andmode of decision making
III Each phase resulted in different magnitudes for two keylabour supply parameters: the own-wage (compensated)elasticity and the income elasticity of the Slutsky equation.
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Recap: Income & Substitution Effects
I Uncompensated substitution effect (Marshallian wageelasticity)- how hours change in response to wages
εu =wH∂H∂w
=∂ln(H)
∂ln(w)
II Compensated substitution effect - how hours change inresponse to wages keeping utility constant
III Income effect - how hours change in response to incomechanges
εy =YH∂H∂Y
=∂ln(H)
∂ln(Y )
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Recap: Income & Substitution Effects
I All linked by the Slutsky equation
εu = εc +wHYεy
II See Blundell and MacCurdy (1999) for derivation
III Assume leisure is a normal good - εy < 0
IV Rationality dictates that εc ≥ 0
V ‘Fight’ as to which dominates
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary PhasesI Phase 1: Late Nineteenth Century to the 1920s - The
Independent Female Worker
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 1: Late Nineteenth Century to the 1920s - TheIndependent Female Worker
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 1: Late Nineteenth Century to the 1920s - TheIndependent Female Worker
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 1: Late Nineteenth Century to the 1920s - TheIndependent Female Worker
i Social stigma; jobs often dirty and dangerous
ii Av. female worker less educated than the population average- ‘lower class women have always worked’
iii Large negative income effect dominating - husband and ownwage increases pushing out of the labour force.
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary PhasesI Phase 2: 1930s-1950s - Easing the Constraints on Married
Women’s Work
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 2: 1930s-1950s - Easing the Constraints on MarriedWomen’s Work
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 2: 1930s-1950s - Easing the Constraints on MarriedWomen’s Work
i Technological change increasing demand for office workers &large increase in high school graduation rates
ii Increase in part-time work enabling increase in substitutioneffect - previous restrictions placed bounds on the magnitudeof the elasticity, as before restricted to adjustment on theextensive margin while now flexibility on intensive margin
iii Diffusion of new home technologies reducing femalereservation wage
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary PhasesI Phase 3: 1950s-1970s - Roots of the Revolution
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 3: 1950s-1970s - Roots of the Revolution
i Income effect continuing downward trend as work for marriedwomen became more acceptable (some impact of war timework)
ii Average working woman in 1940s now more educated thanthe average working woman in the population
iii Demand function for labour increasing over a relatively stableand highly elastic female labour supply function.
iv However, few women expected to be employed for most oftheir adult lives - few had a career in mind
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Evolutionary & Revolutionary Phases
I Phase 4: Late 70s to Present - The Quiet Revolution
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Employment Expectations
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
College Attendance
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
College Attendance
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Questions & Reflections
I Levelling off in growth of female participation rates — why?Are women opting out?
II Why does the gender pay gap still exist? Why does it differacross occupations?
III What caused the rise in divorce? Why is there so muchheterogeneity in family structure?
IV What role has legal and social security reform played?What role might it play in the future?
V Moving from descriptive to analytic and predictive
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Outline for Today
I Motivation
II Housekeeping
III Key Changes & Goldin’s Phases
IV Gains to Household Formation
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
The Economic Gains to Marriage
I Marriage = partnership for the purpose of the jointproduction and joint consumption (inc. children)
II Gains from marriage include:i Sharing public goods
ii Division of labour to exploit comparative advantage andincreasing returns to scale
iii Risk pooling
iv Extending credit
v Children
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Relationship to the Market
I None of the gains actually require the traditional familyinstitution
II The role of the family depends on market conditions (& viceversa) — If all goods and work activities are marketable, noneed to form marriages to enjoy increasing returns or poolrisks
III Some argue that the family simply fills gaps in the marketsystem
IV Other stress the intrinsic advantages in monitoring andenforcement that the family achieves
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Public goods
I Some consumption goods are non-rivalrous - expenditureson children, heating, housing
II A couple can always replicate the private consumption ofthe two partners as singles, purchase the maximal amountof the public good that each bought as singles, and stillhave money left over
III Use the concept of equivalent income to quantify how largethese gains are — the amount of income needed by twosingles to achieve the same outcome as if they livedtogether.
i Outcome - buying the same bundle / achieving the sameutility level
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Specialisation
I Specialisation on the basis of comparative advantage
II Comparative advantage could be developed via differentialinvestment or learning by doing
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Risk sharing
I Can trade consumption in different states of nature — bothcan be made better off by transferring resources to theperson in a state where their marginal utility is relativelyhigh provided that incomes are not perfectly correlated
II Efficient risk sharing — consumption of each familymember only varies with family income
III Rosenzweig and Stark (1989) —- marriages in rural Indiaarranged between partners who are significantly distant,reducing the correlation in rainfall and generating gainsfrom insurance
Dr Abigail Adams
Family Economics - Week 1
Introduction Motivation Housekeeping Topics Facts Gains
Next Week
I To understand many of the changes and the decisionsmade by existing unions, need to better understand thenature of the family decision process
II Cooperative v. Noncooperative static models
III Assign presentation topics
Dr Abigail Adams
Family Economics - Week 1