Abstract
This paper examines the interactions between spouses’ decisions to join the labor force. We use the asymptotic least squares method in order to estimate a system of equations with limited dependent variables. We find that when spouse’s decision-making is modeled as simultaneous, this affects primarily the man’s participation equation who appears to be positively influenced by whether the woman works or not, by the number of children and by the birth of a child. The woman’s decision to participate is not affected by whether the man participates or not and depends negatively of the number of children and the birth of a child. This implies that there is a female leadership in decisions to participate in the labor market and that the added-worker effect should be reinterpreted as a function of demography rather than unemployment.
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Notes
This property is required to apply Asymptotic Least Squares.
The previous reference includes an application with a generalized Tobit model, an ordered Probit model and count data.
Indices “i” are omitted for simplicity.
This assumption can be made without loss of generality provided that the two equations include a constant term. Moreover it implies that E(v 1) = E(v 2) = 0.
This is referred to as the “non-spherical” case in the literature.
In theory, the number of children can be different for both spouses due to family recompositions. This would create strong muticolinearity in our application.
There are five values for the number of children (none, 1, 2, 3, 4 and more) and one dummy is dropped to avoid perfect multicolinearity with the constant term (i.e., “none” is taken as the reference). The birth of a child is represented by one coefficient. This puts 5 constraints on each equation, that is 10 constraints on the system.
Notice that there is always an indirect effect in a system of equations. The nationality of one person influences its labor market participation and, through this channel, the labor market participation of her (his) spouse.
One value («French») is taken as the reference, so that there are only three constraints.
This selection comes from the fact that we need to distinguish men from women in order to estimate the model.
Due to confidentiality requirements, the matching was performed by INSEE.
The broad sectoral decomposition between agriculture, industry and services was not found to be significant.
See Afsa (1998).
The poverty line is defined as 60% of median French monthly earnings. It corresponds to earnings of 640 Euros per month per consumption unit in 1996.
Moreover, even with different identification constraints (see Table 4), we always find that women participation has a positive influence on men participation, while men participation has no significant influence on women participation (at the 5% level).
However, we should mention the causality problem that exists with the estimation of the added-worker effect. As we do not take the fertility decision into account, not only the number of children may affect the labor market participation but also the woman’s expectation to be unemployed for the near future may increase her desire to be pregnant.
Results of the bivariate probit are not reported but are available on request.
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Acknowledgements
We are grateful to François Gardes, David Margolis, Shoshana Grossbard, Olivier Donni, Benoît Rapoport, Catherine Sofer, Nathalie Picard, Olivia Ekert and Pierre Cahuc for helpful comments.
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Duguet, E., Simonnet, V. Labor market participation in France: an asymptotic least squares analysis of couples’ decisions. Rev Econ Household 5, 159–179 (2007). https://doi.org/10.1007/s11150-007-9008-z
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DOI: https://doi.org/10.1007/s11150-007-9008-z