Explaining Changes in Female Labour Supply in a Life-cycle Model

We study the life cycle labour force participation of three cohorts of American women: those born in the 1930s, 1940s and 1950s. We document the large shifts in labour supply behaviour among these three cohorts, then use a life cycle model with endogenous female labour force participation, consumption and saving choices to search for an explanation. The dynamics of labour supply depends on child costs (relative to earnings), returns to experience and the rate of depreciation of human capital when out of the labour market. We calibrate the model to match the behaviour of the middle cohorts 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 shifts in the cost of children relative to life-time earnings are the most likely explanation.