The main themes of the proposal are in two areas.: How culture affects female work and fertility decisions and the interaction between marital sorting and inequality.
Economists tend to study how individuals, with a given set of preferences and beliefs, interact with incentives provided mostly by markets and within an institutional framework, to produce outcomes. This approach leaves out the fact that preferences or beliefs, broadly speaking, themselves have a systematic component that reflects old interactions of preferences, markets, and institutions. What these preferences and beliefs are, and how they vary across time and space can have important economic consequences. This missing systematic component can be thought of as "culture". The PI will investigate the effect of culture on two decisions that are of evident economic significance: Female labor force participation and fertility decisions. These two decisions are obviously interrelated and they both concern women. The focus on women is not accidental. Women are notable in the sense that their role in society differs dramatically across space and over time. Culture, i.e., preferences, beliefs and expectations regarding women's role, may be an important factor explaining the variation. To isolate culture from markets and institutions, the PI will study women born in US but whose parents were born in foreign countries. These individuals, it can be argued, face the same markets and institutions but have different heritages as reflected in the native country(ies) of their parents. This heritage includes different beliefs about the appropriate role of women in society and preferences for family size. The proxy variable for culture will be, in each case, past values of variables related to the economic decisions that are the object of analysis, namely, past values of female market-work behavior and fertility related variables in the woman's country(ies) of heritage. These variables should reflect the interactions of past preferences, markets and institutions, and hence, according to the thesis, of culture as well. As the markets and institutions embodied in those decisions are no longer the ones faced by women in the US, only the cultural element should survive to impact individual's decisions. In order to ensure this, the PI will examine decisions by women in the US in 1970, using past values of female LFP and fertility in the country-of-ancestry in 1950. The most important challenge the work must meet is to show that other economic variables are not driving results. In particular, the PI will be concerned with alternative aggregate variables and showing, to the extent possible, that neither unobserved human capital nor network quality are responsible. The PI also plans to examine the role of the neighborhood in cultural transmission.
The second topic of research is the relationship between marital sorting (i.e., the correlation of spouses in certain attributes, particularly education), education and inequality. In Fernandez, Guner and Knowles (2001) the PI developed a dynamic model of endogenous marital sorting and inequality. In that model, a skilled individual who met an unskilled individual with whom she/he shared a high match quality faced a tradeoff between "love" and money. Greater inequality led to greater marital sorting and, as a result of borrowing constraints, to fewer skilled individuals in the future. The model above and the empirical work that examined its implications ignored differences between genders. The PI plans to develop a model that allows her to analytically tackle the relationship between gender differences, sorting, and inequality. This should allow her to derive implications for marital sorting and inequality that stem from differences in how men and women fare in the labor market, the effect of social norms that discourage women's participation in market work, and both the female skill premia and the male-female wage gap. The PI will proceed to examine the theoretical implications using both international and US data sets. Using variation across US states will also allow us to examine the intergenerational implications of the model, for which it is important that individuals face similar technologies and institutions. Intellectual Merit: The work will contribute to the theoretical and empirical understanding of the relationship between culture and economics and between marital sorting and inequality. Broader Impacts Resulting from the Proposed Activity: The proposed activity will help develop an understanding of how the economy and family interact which has ramifications for many other areas of research, from sociology to health.
