Statistical Discrimination and Fertility: Revisiting Gender Differences in the Labor Market

Cecilia Machado, Columbia University

This paper provides an alternative explanation for gender discrimination by employers. Women who intend to have children might become less productive in future if they allocate less effort to employment after child-bearing. At a minimum, they will lose time due to delivery and breast-feeding. The model is one of statistical discrimination, with woman's fertility intentions being treated as the ultimate unobservable characteristic to employers. Since motherhood is believed to decrease labor productivity, women's wages are a decreasing function of expected future fertility rates. The gender wage gap can be addressed in this model, for equally skilled individuals are paid differently according to gender. The model also predicts ex post correlation between skill and fertility choices of women and a gender skill gap. Shifts in motherhood preferences and in the skill premium are shown to affect fertility rates and have consequential impacts on wages and skill investment decisions of women.