Life Cycle Employment and Fertility Across Institutional Environments

Abstract

In this paper, we formulate a dynamic utility maximization model of female labor force participation and fertility choices and estimate approximate decision rules using data on married women in Italy, Spain and France. The estimated decision rules indicate that first-order state dependence is the most important factor determining female labor supply behavior in all three countries. We also find that cross-country differences in state dependence effects are consistent with the order of country-level measures of labor market flexibility and child care availability. Counterfactual simulations of the model indicate that female employment rates in Italy and Spain could reach EU target levels were French social policies to be adopted in those countries.