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Kelly McCruddenJessica Crawford
George FindlayPamela Ho
Schirle, T. 2008 Journal of Labor Economics, Vol. 26, No. 4 (October 2008), pp. 549-594
Goal of the Study o To explain the increases in older men’s
participation rates since the mid-1990s specifically looking at the United States, Canada
and the United Kingdom
o Do the wives increases in labor force participation decisions effect their husbands labor force participation decision?
Background to the Problemo Study focuses on older men, aged 55-64o Participation rates of these men has been
progressively decreasing throughout the 20th century (in OECD countries)
o During mid-1990s participation rates of older men increased a significant amount
o Older women’s participation rates has also been increasing
Participation Rates of Individuals Aged 55–64, By Sex, 1976
Participation Rates of Individuals Aged 55–64, By Sex
What We Can Expect o Income Effect
Husbands can enjoy extra leisure time due to the increase in income with his wife working
o Shared Leisure Effect Couples enjoy leisure time together Husbands may not like as much leisure time if their
wife is working and they’re spend the time alone this would delay their retirement, and increase their
labor force participation
Labor Supply Decision of Husbands and Wives
wives utility:
Estimate Model:
Husband utility: depends on his consumption and labor force participation
Effect of Wives’ Participation Probit models are used Baseline estimates include:
Husbands educationAgeNumber of children in household
Results similar to estimated modelMay be smaller do to assortative matching
Husbands of highly educated wives less likely to participate, therefore wives with high levels of education more likely to participate
Cohort effects largest among more educated women
Couples that both have high levels of education more likely to participate in the labour market than couples without the same level of education
Continued
Robustness Checks and Other Factors To Consider
o Healtho Defined-benefit pension plans
• Unlikely that changes in pension coverage can explain the increase in participation
o US stock market
Continued
Age difference between husbands and wives
o Wife’s wage incomeo Different effects for different age groupso Younger married men vs. older married
men
Decomposition of U.S. Participation Rates
DiNardo-Fortin-Lemieux Decomposition of Changes in Participation
o Decomposition is sequentialo Two stages of decomposition
• Hypothetical probability created• Counterfactual probability created
o Reverse order decomposition
DiNardo-Fortin-Lemieux Decomposition Results
o Output uses 2 models for decomposition estimates:Probit ModelBivariate Probit Model
o Varied results for United States, Canada, and the United Kingdom
Additional Evidenceo Effect of changes in wives’ labour force
participationo Effect of changes in men’s
characteristicso Relax assumption of fixed husband’s
participation decision
Historical Evidenceo Hold age structure and educational
attainment constant since 1980o Participation Rates
Future Trends Age and educational attainment work in
opposite directions on the participation rate Wives’ participation rate will work to
increase the participation rate of their husbands
Overall, we can expect that participation will increase between 1.5% – 3%
Key Results Participation rates increase as a result
of: the increases in the participation rates of
wivesIncreases in educational attainmentChanges in the age structure
Results relevant for Public PolicyCPP:
EC306 handout #3