Intertemporal Substitution in Maternal Labor Supply: Evidence Using State School Entrance Age Laws

Abstract

I propose a new framework to study the intertemporal labor supply hypothesis. I use an exogenous source of variation in maternal net earning opportunities, generated through school entrance age of children, to study intertemporal labor supply behavior. Employing data from the 1980 US Census and the NLSY, I estimate the effect of a one year delay in school attendance on long run maternal labor supply. IV estimates imply that having a 5 year old enrolled in school increases labor supply measures for married women, with no younger children, by between 7 to 34 percent. Further, using a sample of 7 to 10 year olds from the NLSY, I investigate persistence in employment outcomes for a married mother whose child delayed school entry. Results point towards long run intertemporal substitution in labor supply. Rough calculations yield an uncompensated wage elasticity of 0.76 and an intertemporal elasticity of substitution equal to 1.1.

Keywords: Intertemporal Subsitution, Kindergarten Entrance Age, Maternal Labor Supply

JEL Classification: J22, J13, I20