2004) Explaining Changes in Female Labour Supply in a Life-Cycle Model

In this paper we study the life cycle labour force participation of three cohorts of American women: those born in the 1930s, 1940s and 1950s. We rst document the large shifts in labour supply behaviour and the patterns of observed wages among these three cohorts. Our focus is on the increase in the labour supply of mothers between the 1940s and 1950s cohorts. We construct a life cycle model with endogenous female labour force participation, consumption and saving choices to search for an ex-planation. The dynamics of labour supply depends on child care costs (relative to earnings), returns to experience and the level of female wages. We calibrate the model to match the behaviour of the middle cohort and investigate which changes in the main determinants of labour supply could have accounted for the substantial increase in labour supply in the early part of the life cycle observed for the youngest cohort. We conclude that a combination of a reduction in the cost of child care alongside a reduction in the wage gender gap is needed to match the observed changes