The causal effect of the number of children on gender-specific labor supply elasticities to the firm

We estimate the effect of the number of children on the female and the male wage-elasticity of labor supply to the firm, using instrumental variables estimation in data from the US Current Population Survey (CPS, 2000-2019). Parents’ number of children is instrumented with the sex mix of their first two children. We find that the male wage-elasticity of labor supply to the firm significantly increases with the number of children, while the female elasticity is not significantly altered. That is, we find evidence that male labor markets become more competitive with the arrival of children. Our results also show that firms have substantial monopsonistic power and, in line with the monopsony theory of the gender pay gap, that male labor markets are more competitive than female markets.

Publication year:2021

Accessibility:Open