The Career Costs of Children

Abstract

This paper studies fertility and labor supply of women to quantify the life-cycle career costs associated with children. We estimate a dynamic life-cycle model, extending existing work by incorporating occupational choices, allowing for skill atrophy that is occupation specific and can vary over the career cycle, and by introducing risk aversion and savings. This allows us to better understand the interplay between job characteristics, such as skill atrophy or differential wage growth, and the planning of fertility, as well as the sorting that takes place both into the labor market and across occupations, and to capture the trade-off between occupational choice and desired fertility. We use this model to determine the costs of children, how they decompose into loss of skills during interruptions, lost earnings opportunities, lower accumulation of experience, and selection into more child-friendly occupations, and analyze what are the longer run effects of policies that encourage fertility.