Abstract

A striking observation of the U.S. and other labor markets is the weak position of women in terms of job attachment, employment, and earnings relative to men. We develop a model of fertility and labor market decisions to study the impact of fertility on gender differences in labor turnover, employment, and wages. In our framework, individuals search for jobs and accumulate general (experience) and specific (tenure) human capital when they work. They can also increase their wage by moving to a job of higher quality. Labor market decisions (e.g., job acceptance and job mobility) may differ across genders: females that give birth may decide to interrupt their labor market attachment in order to enjoy the value of staying at home with their children. The model economy is successfully calibrated to match aggregate statistics in terms of fertility, employment, and wages. We find that fertility decisions generate important gender differences in turnover rates, with long lasting effects in employment and wages. These differences in labor turnover account for almost all the U.S. gender wage gap that is attributed to labor market experience by Blau and Kahn (2000, Journal of Labor Economics15(1), 1–42). The model also implies a very small role of tenure capital in accounting for wage differences between males and females (gender gap), and between females with and without children (family gap). Journal of Economic Literature Classification Numbers: E24, J13, J21, J31.

Author Keywords: fertility; turnover; tenure; employment; wages

*1 We especially thank Richard Rogerson and an anonymous referee for very detailed and valuable comments. We have also benefited from the comments of the editor (Raquel Fernández), Ig Horstmann, Angelo Melino, and Aloysius Siow. All remaining errors are our own. Erosa and Fuster gratefully acknowledge the financial support from the Spanish Ministry of Education through Grant SEC2000-0684 and SEC2001-0674, respectively. Restuccia acknowledges the financial support from the Connaught Fund at the University of Toronto and the Social Sciences and Humanities Research Council of Canada.

^f1 andres.erosa@uab.es

^f2 luisa.fuster@econ.upf.es

^f3 diego.restuccia@utoronto.ca