Lyfe cycle employment and fertility across institutional environments

Recent empirical evidence show considerable variation in the degree of labor market participation of women during childbearing across different countries. In order to investigate this issue, we analyze intertemporal employment patterns and its interaction with fertility, comparing countries which share labor market institutional characteristics as well cultural characteristics but differ in several child care policies. We using panel data from the European Panel 1994-2001 and analyze a discrete choice model which allows for permanent unobserved heterogeneity, AR(1) serially correlated errors and state dependence. The dynamic model is estimated by simulated maximum likelihood, using an algorithm that deals with the initial conditions problem and corrects for biases that arise fromclassification errors in reported discrete outcomes.We analyze the robustness of the results from the different estimation methods in measuring the degree of state dependence of labor marketparticipation in Italy, Spain and France. We find that persistence is stronger where participation is lower, confirming that in countrieswhere the costs of adjusting employment levels from a period to the next, the proportion of women who are excluded from the the labor market is larger. We attribute these differences to the lack of child care policies and the more rigid labor market regulations in Italy and Spain which affect the patterns of labor market attachment during child bearing.