The Effect of Children on Earnings Using Exogenous Variation in Family Size: Swedish Evidence
(English)Manuscript (preprint) (Other academic)
This paper analyses the impact of having one more child on the outcomes of men and women in the labour market. This issue is known to be complicated as the decision to have (more) children is also dependent on current and future labour market prospects. To overcome this endogeneity problem, I use the exogenous variations of sex composition of the first two children, an identification strategy originally applied by Angrist and Evans (1998) on U.S. data. I use a rich Swedish register data set to explore the effect of children on fathers' and mothers' labour market outcomes from 1980-2005, and separate the effects of children on participation and earnings. This study identifies long-run and short-run effects, and investigates whether the effects differ over time. This latter issue is particularly interesting for Sweden as family policies have changed significantly over the years. My findings suggest that having an additional child has a stronger negative impact on earnings than on participation. However, mothers experience a substantial but not complete recovery in earnings in the long-run. These results remain stable despite the rapid expansion of Swedish family policies.
Female labour force participation, Family size, Exogenous variation
Research subject Economics
IdentifiersURN: urn:nbn:se:su:diva-37278OAI: oai:DiVA.org:su-37278DiVA: diva2:298313