Shelly Lundberg

Hours Restrictions and Labor Supply

This study presents a model of labor supply in which individuals may face constraints on their choice of work hours, and analyzes the sensitivity of parameter estimates and policy conclusions to the usual assumption of unrestricted choice. We set up the labor supply decision asa discrete choice problem, where each worker faces a finite number of employment opportunities, each offering fixed hours of work.The distribution from which these are drawn, as well as the number of draws, is estimated along with the behavioral parameters of individual labor supply.The standard model with unconstrained hours appears as a special case where the number of draws approaches infinity. We estimate the mean absolute difference between desired and actual work hours to be about ten hours perweek. The results strongly support the notion that hours choices are constrained, and suggest that models which ignore restrictions on hours worked may yield biased estimates of the wage elasticity of desired hours. Further, we suggest that analysis of policies such as income transfers and the flat rate tax which do not consider their effects on the distribution of hours offered may be very misleading.

How Does Adolescent Fertility Affect the Human Capital and Wages of Young Women

We estimate the relationship between teenage childbearing, human capital investment, and wages in early adulthood, using a sample of women from the National Longitudinal Survey of Youth and a large set of potential instruments for fertility-principally state and county-level indicators of the costs of fertility and fertility control. Adolescent fertility substantially reduces years of formal education and teenage work experience and, for white women only, early adult work experience. Through reductions in human capital, teenage childbearing has a significant effect on market wages at age 25. Our results suggest that public policies which reduce teenage childbearing are likely to have positive effects on the economic well-being of many young mothers.

Adolescent fertility and the educational attainment of young women.

Analyses based on a sample of 2,795 women interviewed annually from 1979 through 1991 in the National Longitudinal Survey of Youth show that early childbearing lowers the educational attainment of young women. After controls for an extensive set of personal and community characteristics are taken into account, having a child before age 20 significantly reduces schooling attained by almost three years among whites, blacks and Hispanics. Having a child before age 18 has a significant effect only among blacks, reducing years of schooling by 1.2 years.

The retirement-consumption puzzle: a marital bargaining approach

Evidence from several countries reveals a substantial drop in household consumption around the age of retirement that is difficult to explain with life-cycle models. Using food consumption data from more than 550 households from the Panel Study of Income Dynamics for the years 1979-1986 and 1989-1992, the authors find that married couple households decrease their expenditures on food consumed both at home and away from home by about 8 percent following the retirement of the male household head. This result is robust for several alternative definitions of retirement. No significant decrease in consumption is found for single households, either in a sample of males or a pooled sample of single males and females. These results are consistent with a model of marital bargaining in which wives prefer to save more than their husbands to support an expected longer retirement period, and relative control over household decisions is affected by control over market income.

Child gender and the transition to marriage.

We estimate the effect of a child’s gender on the mother’s probability of marriage or remarriage using data from the PSID Marital History and Childbirth and Adoption History Files. We find that the birth of a son speeds the transition into marriage when the child is born before the mother’s first marriage. A competing-risks analysis shows that the positive effect of a son is stronger for marriages to the child’s biological father than for other marriages. We find no significant effect of child gender on the mother’s remarriage probabilities when the children are born within a previous marriage. These results are consistent with a marital-search model in which sons, more than daughters, increase the value of marriage relative to single parenthood.

Child gender and father involvement in fragile families

In this article, we use data from the first two waves of the Fragile Families and Child Wellbeing Study to examine the effects of child gender on father involvement and to determine if gender effects differ by parents’ marital status. We examine several indicators of father involvement, including whether the father acknowledges “ownership” of the child, whether the parents live together when the child is one year old, and whether the father provides financial support when the child is one year old. We find some evidence that child gender is associated with unmarried father involvement around the time of the child’s birth: sons born to unmarried parents are more likely than daughters to receive the father’s surname, especially if the mother has no other children. However, one year after birth, we find very little evidence that child gender is related to parents’ living arrangements or the amount of time or money fathers invest in their children. In contrast, and consistent with previous research, fathers who are married when their child is born are more likely to live with a son than with a daughter one year after birth. This pattern supports an interpretation of child gender effects based on parental beliefs about the importance of fathers for the long-term development of sons.

On the Persistence of Racial Inequality

A model of the “new growth theory” type is applied to the persistence of racial income differentials in the presence of community segregation. When community human capital affects human capital accumulation by individuals, differences between groups can persist indefinitely, even in the absence of current discrimination. Intercommunity mobility can benefit advantaged minority workers, who leave behind an impoverished ghetto. Workplace integration without community integration may not lead to equality even in the long run. We examine various policies and show that a large, temporary intervention may be successful in achieving racial equality while a smaller permanent one fails.

Effects of State Welfare, Abortion and Family Planning Policies on Premarital Childbearing Among White Adolescents

This study develops an empirical model that measures the influence of state welfare, abortion and family planning policies on decisions concerning premarital pregnancy, abortion and single parenthood. Data are based on the fertility and marital experiences of white females from the three youngest cohorts of the National Longitudinal Survey of Youth, for 1979-1986. The results show that laws restricting contraceptive availability are associated with a higher risk of pregnancy. Restrictive policies on public funding of abortions reduce the likelihood of abortion, while greater availability of abortion services is associated with a higher likelihood that adolescents will obtain abortions. Finally, the estimates indicate that higher welfare benefits reduce the probability that pregnant adolescents will marry before bearing their children.

Tied Wage-Hours Offers and the Endogeneity of Wages

In the standard model of labor supply, each worker is a price taker,where the relevant price is an hourly wage rate which is fixed in the short run, and which does not depend upon the number of hours supplied. With this basic assumption, the wage can be regarded as exogenous for the purpose of estimating a labor supply function. This paper proposes and implements a pair of tests for the exogeneity of wages in a longitudinal labor supply model, and for the particular failure of exogeneity associated with jobs that offer wage-hour packages.The first test is very simple -- it amounts to a test of whether hours Granger -- cause wages at the individual level. The second test involves a simultaneous estimation of labor supply and wage offer equations. Both tests indicate that the offered wage is related to hours worked, though the offer locus is, for this sample, very flat. The principal conclusion is that labor supply equations cannot properly be estimated in isolation from the process generating wages, even when long time series are available on a sample of individuals.

Saving for Retirement: Household Bargaining and Household Net Worth

Traditional economic models treat the household as a single individual, and do not allow for separate preferences of and possible conflicts of interest between husbands and wives. Since wives are typically younger than their husbands and life expectancy for women exceeds that for men, wives may prefer to save more for retirement than do their husbands. This suggests that households in which wives have greater relative bargaining power may accumulate greater net worth as they approach retirement. Most empirical models of net worth in the literature do not include characteristics of both spouses. We present a more complete unitary model of household net worth and find, among couples in the first wave of the Health and Retirement Survey, that the characteristics of both husband and wife are determinants of net worth. We explore the importance of bargaining in marriages of older couples by examining the empirical relationship between their net worth and factors such as relative control over current income sources, relative age, and relative education. We find some evidence that low relative education of wives is associated with low net worth.