Transcript Economics of Gender Chapter 5 Assist.Prof.Dr.Meltem INCE
Economics of Gender
Chapter 5
Assist.Prof.Dr.Meltem INCE YENILMEZ
Economic Tools and Economic Thinking
• • • • • Microeconomic Approach A. Constrained optimization B. Comparative statics Functions A. Utility function B. Household production function Total and Marginal Functions Supply & Demand Empirical Methods A. Regression analysis B. Natural experiments
Microeconomics
• • • • •
Choices:
– – – Individuals are rational utility maximizers Constrained by budget and time (constrained maximization) Decisions made on the margin
Variables
: – – Endogenous (dependent or choice variable) Exogenous (independent or explanatory variables)
Theory:
– Posits relationship between dependent variable and independent variable(s).
Functional form
:
X
* =
F
(
Z
).
Best choice
(solution):
x
*
Comparative Statics
• • • • Assume: X * =
F
(
Z
).
Theory
:
X
*/
Z
If
Z
, this causes 0.
X
*.
Microeconomics
: –
Economic actors
something.
– – choose endogenous variables to maximize
Best choice
: satisfies above total condition and a marginal condition.
Theory
predicts how best choice changes when exogenous variables change.
–
Predictions
: comparative static results; use to assess theory.
Functions
• • •
Functions
: A convenient way to show what depends on what.
– Demand function can be written as
Q
=
f
(
P
)
Utility function
: – – –
U
=
U
(
X
,
Y
) where
X
&
Y
are two goods; Ordinal utility versus cardinal utility Utility theory a theory of rational choice
Household production function
: – – – – –
G
= G(
T
,
Z
).
G
: amount of HH goods produced.
T
: first input: time.
Z
: amount of all other inputs.
Similar to a firm’s production function:
Q
=
Q
(
K
.
L
).
Supply and Demand Analysis
• • •
Law of Demand
– –
Q d
=
F
(
P
; other
P
;
Y
; Preferences) Negative slope .
Law of Supply
– –
Q s
=
F
(
P
; input prices; technology) Positive slope.
Equilibrium
– – – Occurs naturally Excess supply Excess demand
Comparative Statics of Supply and Demand
• Change in ceteris paribus factor – Shift demand curve • Tastes, preferences, income, prices of substitutes and complements, changes in population – Shift supply curve • Prices of inputs, weather, technology, number of firms
Empirical Methods: Regression
•
Regression Analysis
: A statistical technique for estimating relationship between two or more variables – One
dependent
variables variable and one or more
independent
– Example: Prediction from a demand function – – Write as
regression equation
:
Q d
• • • = +
P
+
Q d
/
P
= ; (1/ is value of
Q d
is slope of
D
when
P
is random error term curve) = 0; (intercept)
More on Regression
• • • •
Multiple regression
: Adds in more independent variables Want to add in as many relevant
X
s as we can (so now have 1 , 2 , etc.)
Q d
– = + Where
Y
1
P
+ 2
Y
is income + 3 Pref + If we leave out an important
X
, then the estimated values of and are “biased”
More on Regression
• • •
Types of variables
: – – – Continuous Dummy: yes/no Natural logs: ln(wage) so b on education is a percentage return to education
Sampling error
: – To what group do the results relate?
Goodness of fit:
– What percent of variation across individuals in dependent variable is explained by the regression-measured by the R squared (R 2 )
Marriage and the Family—An Economic Approach
•
Why look at marriage first?
– Different impact for women: – identity; like occupation.
Important economic institution: Major determinant of income distribution – Marriage as “economics as choice:” even if key determinant is love – Nobel Prize Winner Gary Becker: The family can be viewed as a miniature factory making both consumption and investment decisions.
Overview of Marriage and Family Structure
•
Changing family structure over time
: – Cohabitation – Single parenthood – Rising divorce rates – Rising rates of re-marriage – Same sex unions
Family Structure
• •
Biggest change
in family structure occurring among households with children – – 1960: over 90% kids in 2-parent households.
2006: about 71% kids in 2-parent households.
Definitions
: –
Family Household
: 2+ persons sharing household that are related by marriage, blood, adoption.
–
Non-family Household
: 1+ unrelated (like college students living together).
–
Householder
: single adult, heading a household
Specialization
• Do women really have an advantage in home production and why? • This model implies that specialization is efficient and therefore a good thing.
Risks of Specialization
• • • Life-cycle changes: advantage changes as individual ages (kids grow up), etc.
Specialization divorce Women who specialize and then re-enter the paid workforce find earnings potential has fallen. This is risky given high probability of divorce.
– Reduces incentives to specialize.
– Both occur simultaneously: • divorce specialization; • specialization divorce.
An Example of Specialization and Exchange
• • • •
Two activities
: – – Paid work (
w
) Home work (
H
)
Two people
: Mr. M and Ms. F
Each has own “prices”
that show productivity in each activity (or, value of time in each activity).
w
= value of paid work.
H
= value of home work
Interpretation of w and H:
w
= what earn per hour in market;
H
= value of home cooked meal prepared in an hour.
Economies of Scale
• • • •
Essentially:
It costs less per person if two people live together: This lowers the per-person (average) housing cost, food cost, etc.
Average cost
as # persons
.
So, need one refrigerator whether one person or 5 people live in a house.
Example:
– Official poverty threshold incorporates this idea: Threshold for 2 people is NOT twice the threshold for one person.
Risk Sharing and Public Goods as Benefits to Marriage • •
Risk-sharing
: lowers the cost of job loss if two people share expenses.
–
Good example
from “partners.” of how cohabiting college students differ
Public goods
: type of goods that can be consumed by 1 person without utility from consumption.
– – Example: watching a TV program.
Institutional advantages: • • Tax benefits Access to spouse’s health coverage.
A Supply & Demand Model of Marriage • •
Uses Becker Model
: Productivity as a proxy for utility.
– – How marital status choice is made How gains of trade are divided between a husband and wife
Need basics
– (M = male; F = female):
Output:
• • For single person:
Z M
and
Z F
For married-couple HH:
Z MF
–
Share of Output:
• • Amount of
Z MF
Amount of
Z MF
to husband =
S M
to wife =
S F
Details on the Marriage Market
• • • •
NOT
assuming that
S M
=
S F
Note
:
S M
+
S F
=
Z MF
Marriage “rule”:
– – – Marry if expect to be better off: Male: marry if
S M
Female: marry if
S F Z
M Z F
Implies
– – that for a married couple:
S M
+
S F
So:
Z MF
Z M Z M
+
Z F
+
Z F
– Gains to marriage exist for most individuals.
Basics of the Supply & Demand Model • •
Price term, S
F
:
– What a woman must receive to be willing to marry and what a man is willing to pay to be married.
Restate marriage “rule” and resulting shape of S curve:
– Marry only if
S F
Z F
.
– S F ranges from very low to very high; when
S F
willing to marry.
low, very few women –
When S
F
very high
: all women willing to marry; curve becomes vertical since no more single women.
– Shows positive relationship between price and quantity supplied.
•
Law of Supply
The Effects of Changes in Supply & Demand
• •
Three examples:
1) Change in sex ratio 2) Women’s improved labor market opportunities 3) Effect of birth control, etc.
Change in sex ratio:
– – Differences by age, race and education Effect of a • in sex ratio: # women with no # men • • Shift parallel part to the right See slope (same % in #women ; smaller # high
S F
).
at low
S F
; larger # at
• •
Other Changes in Supply & Demand
Increase in women’s wages:
– Will
Z F
(well-being while single) – Shifts S upward: • Each woman now willing to marry at a higher value of
S F
than before. • No change in the vertical point
More effective birth control
: – •
Z F
and
Z M
start with
S
2 • and
D
2 AIDS: start with
S
1 and
D
1