Specialization, Inequality, and the Labor Market for Married Women (with Yona Rubinstein)

Abstract

The household specialization model is about the allocation of human time and effort between market and nonmarket sectors, and suggests that, over some substantial range, activity in each sector has increasing returns at the person level. We show how the specialization model qualifies other models of labor supply, by predicting that married female labor supply responds to the ratio of the gender wage gap to within-gender wage inequality, rather than to the gender gap itself. Hence, growing inequality within gender can have the same aggregate effect on labor supply as a falling gender wage gap. This is quite relevant for the 1970's, a period when the gender wage gap was stable while within-gender wage inequality was growing. It is also relevant for the 1980's, when the gender gap closed, and was reinforced by more growing inequality. Because inequality is predicted to have a larger effect when the gender gap is large, specialization may even explain why the wives entering the labor force since 1970 were disproportionally married to men with high and growing wages. The specialization model features the gap-inequality ratio because it is a proxy for the fraction of wives with earnings potential that (sufficiently) exceeds her husbandís. This latter statistic has not received much attention in economics, but it has in other fields. We show how this fraction is related to earnings inequality and might be closely related to female labor supply.


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© copyright 2002 by Casey B. Mulligan and Yona Rubenstein.