Female Labour Force Participation and Intergenerational Mobility

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Women's labor force participation increased dramatically over the post-WWII, especially among mothers of young children. How did the entry of mothers in to the labor force impact the transmission of economic status across generations? Using Norwegian registry data we document trends in mothers' labor force participation and intergenerational mobility across cohorts born between 1965 and 1995. The labor supply of mothers almost quadrupled across cohorts. At the same time, the father-child income elasticity declined substantially. At the individual level, the relationship between son's income and father's income is weaker in families in which the mother worked when the son was a young child. Using a simple covariance decomposition, we show that 25-33\% of the decline in the intergenerational elasticity (IGE) can be explained by the fact the IGE is lower among families in which the mother works, and such families consitute a larger share of the population over time. Structural factors (e.g. changes in economic opportunity or the education system) can explain the rest of the decline. We then develop a statistical framework that illustrates mechanisms through which mothers' work affects the IGE. Mothers' entry into the paid workforce represents a shift from time-intensive to money-intensive investments in children's human capital. The effect on the IGE depends on sorting in the marriage market, the relative importance of time and money inputs in the production of children's human capital, and income and substitution effects on mother's labor supply. The observed trends can be reconciled with our model if women's productivity in childcare is more valued on the marriage market than their labor market productivity, and if money investments have a larger effect on children's human capital than time investments.