why have labor force participation rates of older men increased since the mid-1990's?

Kelly McCruddenJessica Crawford

George FindlayPamela Ho

Schirle, T. 2008 Journal of Labor Economics, Vol. 26, No. 4 (October 2008), pp. 549-594

Goal of the Study o To explain the increases in older men’s

participation rates since the mid-1990s specifically looking at the United States, Canada

and the United Kingdom

o Do the wives increases in labor force participation decisions effect their husbands labor force participation decision?

Background to the Problemo Study focuses on older men, aged 55-64o Participation rates of these men has been

progressively decreasing throughout the 20th century (in OECD countries)

o During mid-1990s participation rates of older men increased a significant amount

o Older women’s participation rates has also been increasing

Participation Rates of Individuals Aged 55–64, By Sex, 1976

Participation Rates of Individuals Aged 55–64, By Sex

What We Can Expect o Income Effect

Husbands can enjoy extra leisure time due to the increase in income with his wife working

o Shared Leisure Effect Couples enjoy leisure time together Husbands may not like as much leisure time if their

wife is working and they’re spend the time alone this would delay their retirement, and increase their

labor force participation

Labor Supply Decision of Husbands and Wives

wives utility:

Estimate Model:

Husband utility: depends on his consumption and labor force participation

Effect of Wives’ Participation Probit models are used Baseline estimates include:

Husbands educationAgeNumber of children in household

Results similar to estimated modelMay be smaller do to assortative matching

Husbands of highly educated wives less likely to participate, therefore wives with high levels of education more likely to participate

Cohort effects largest among more educated women

Couples that both have high levels of education more likely to participate in the labour market than couples without the same level of education

Continued

Robustness Checks and Other Factors To Consider

o Healtho Defined-benefit pension plans

• Unlikely that changes in pension coverage can explain the increase in participation

o US stock market

Continued

Age difference between husbands and wives

o Wife’s wage incomeo Different effects for different age groupso Younger married men vs. older married

men

Decomposition of U.S. Participation Rates

DiNardo-Fortin-Lemieux Decomposition of Changes in Participation

o Decomposition is sequentialo Two stages of decomposition

• Hypothetical probability created• Counterfactual probability created

o Reverse order decomposition

DiNardo-Fortin-Lemieux Decomposition Results

o Output uses 2 models for decomposition estimates:Probit ModelBivariate Probit Model

o Varied results for United States, Canada, and the United Kingdom

Additional Evidenceo Effect of changes in wives’ labour force

participationo Effect of changes in men’s

characteristicso Relax assumption of fixed husband’s

participation decision

Historical Evidenceo Hold age structure and educational

attainment constant since 1980o Participation Rates

Future Trends Age and educational attainment work in

opposite directions on the participation rate Wives’ participation rate will work to

increase the participation rate of their husbands

Overall, we can expect that participation will increase between 1.5% – 3%

Key Results Participation rates increase as a result

of: the increases in the participation rates of

wivesIncreases in educational attainmentChanges in the age structure

Results relevant for Public PolicyCPP:

EC306 handout #3