|
COPYRIGHT 1998 Transaction Publishers, Inc.
Background
The term "family investment hypothesis" was first coined in a paper by Duleep and Sanders (1988, 1993) that sought to explain large differences across immigrant groups in the propensity of married immigrant women to work.(1) Controlling for factors commonly included in female labor force participation estimations, groups with the largest expected growth in immigrant men's earnings were found to have the highest labor force participation of married immigrant women, while groups with the smallest expected growth in men's earnings had the lowest female participation rates. The pattern suggested that financing their husbands' investments in host-country human capital is an important factor affecting the decision of married immigrant women to work.
Two streams of research have provided evidence of the Family Investment Model as a factor affecting the labor force decisions of immigrant married women.
One approach, exemplified in the work of Long (1980) and Beach and Worswick (1993), compares the patterns of work and earnings behavior of immigrant married women (relative to native-born immigrant women) with the patterns of work and earnings behavior of immigrant men (relative to native-born men). In an analysis of white immigrant women using 1970 U.S. census data, Long (1980, p. 628) observed that the earnings of married immigrant women - initially greater than those of native-born women - decreased with years in the United States. The estimated earnings decrease prompted Long to speculate that "wives in immigrant families that have recently entered the United States may have to work to help finance their husbands' initial investments in schooling or job skills required in U.S. labor markets. Later, as earnings of their spouses rise with time in the United States, foreign-born wives reallocate their time from market to nonmarket activities and their earnings are reduced."(2) Using Canadian data, Beach and Worswick (1993) found the initially higher hours worked of recently arrived immigrant women, versus Canadian-born women, decreased with years since migration. Beach and Worswick also found flatter wage profiles for immigrant married women than for native-born married women. They suggested that underlying the flatter wage profiles for immigrant married women was a family investment strategy in which immigrant women forego investment by pursuing work options that are initially higher paying, but offer less opportunity for career investment so as to finance their husbands' investment in host-country skills.
The other stream of empirical research providing evidence of the family investment model has used variation across immigrant groups in the likely extent to which immigrant husbands invest in host-country human capital, while holding constant a woman's own level of host-country skills as measured, for instance, by her own years since migration and level of host-country language proficiency. This is the approach that is used in Duleep and Sanders (1993) and Duleep, Regets, and Sanders (1998), whose work is reviewed below. In a study of Canadian data, Baker and Benjamin (1997) also provide across-group evidence on the existence of the family investment model by comparing the over time profiles of hours worked and wages of immigrant women married to foreign-born men versus immigrant women married to Canadian-born men. Consistent with the family investment hypothesis, they find that immigrant women married to foreign-born men work more upon arrival and have flatter wage profiles and a lower propensity to invest in schooling than do immigrant women married to native-born men.
In the next section, I formalize the family investment hypothesis and incorporate it into a traditional model of female labor force participation. Following this, Section III reviews analyses from Duleep and Sanders (1993) and Duleep, Regets, and Sanders (1998), which provide evidence of the family investment model from across immigrant groups. The paper concludes with directions for further research.
Incorporating the Family Investment Hypothesis into a Traditional Model of Female Labor Force Participation
The traditional model of female labor force participation posits that a woman works if her market wage ([W.sub.M]) - the wage she can receive if she works, which is a function of factors such as education - exceeds her reservation wage ([W.sub.R]) - the wage she must receive in order to work, which is a function of factors such as whether there is a baby in the home and the husband's income. Or, a woman works if [W.sub.M] [greater than] [W.sub.R] at zero hours of work.
To the above model, the following concept may be added: Family members can increase the future labor income of the family by either directly pursuing activities that increase their own skill levels, or indirectly, by engaging in activities that finance, or otherwise support, the investment activities of other family members.
This line of thought leads to the following model reformulation of a woman's decision to work: A woman works if [W.sub.M] + E(q) [greater than] [W.sub.R], where q is the return in terms of the change in the net present value of family income that results from the increased investment in U.S.-specific human capital by the husband which is financed by the wife working.
Specifically, let [y.sub.I] be the husband's earnings stream that results from investment financed by the wife working and let [y.sub.NI] be the husband's earnings stream that would exist if the wife did not work; r is the market interest rate and [p.sub.t] is the probability that the family is in the United States in time period t (the probability that they have not emigrated). Then the expected family investment return to the wife working can be expressed as
E(q) = [Sigma] 1/[(1+r).sup.t-1] [multiplied by] ([y.sub.I,t] - [y.sub.NI,t]) [multiplied by] [p.sub.t]
Thus, the return to the wife-financed investment will depend on the net effect of the investment on the husband's earnings, and how long the family stays in the United States.
In this model, the price (or opportunity cost) of the wife's nonmarket activity is not only her market wage, as in the traditional model of a woman's decision to work, but also the lost investment in the husband's human capital and resulting gain in future family income that would be financed if she worked: the price of non-market activity includes the return to work in terms of the investment it finances. In this way, married immigrant women who are quite similar in terms of factors such as their child status, level of schooling, English proficiency, time in the United States, and husband's income, could be remarkably different in their labor force participation.
Empirically, we would expect that, controlling for factors that affect a woman's market wage and reservation wage, the higher the return to financing her husband's investment in U.S.-specific skills, the more likely she will work. This implies that across immigrant groups, the greater the average return to investment in U.S.-specific human capital for immigrant men, the greater the propensity should be for married immigrant women in these groups to work. Evidence consistent with this hypothesis from two studies - Duleep and Sanders (1993) and Duleep, Regets, and Sanders (1998) - is reviewed below using 1980 and 1990 census data, respectively.(3) Both studies use...
Read the full article for free courtesy of your local library.
|
Bookmark this article
Print this article
Link to this article
Email this article
Digg It!
Add to del.icio.us
RSS
