Jacob Mincer and Labor Supply–Before and Aftermath

Abstract

This paper discusses the impact that Jacob Mincer's 1962 paper “Labor-Force Participation of Married Women...” had on the analysis and empirical estimation of the labor supply of married women, and the supply of labor in general. It is argued that this paper has revolutionized the analysis of labor supply. The sharp increase in married women's labor supply still constitutes a challenge to labor economists who try to explain the phenomenon in terms of income and price effects derived from cross-section studies. It constituted a puzzle to labor economists in the 1950s and 1960s, still captives of the notion of a backwards-bending supply of labor. Mincer combined a theoretical model distinguishing between three uses of time (leisure, work at home, and work in the market) and Friedman's distinction between permanent and transitory earning. He showed that the wage has a positive effect on married women's labor supply, and that this supply is more affected by transitory than by permanent income changes. The new theory serves as the scaffold on which Mincer builds the empirical estimation. The interplay between theory, data, and empirical estimation, and the ingenuity of the empirical research using scant data sources, made this paper the object of emulation. The ideas first discussed in this paper generated many of the developments in the analysis of labor supply witnessed over the last four decades.