These questions were based on an article that profiled women who were part of a book club, had high levels of education (from elite schools), married men with high earnings, and were on track for high?paying careers. They all decided to withdraw from the paid labor market after having children. These questions seek to discuss if and how the labor supply model would predict their choices to exit the labor force and/or to reduce their work hours. (The Opt-out Revolution from NYT by Lisa Belkin)

For these questions, please use the labor/leisure model (choices of L, H, W) which is U(L, H, W)

8. Does the model predict that having a child will lead to more or less paid work? a. First, consider only the effects on home production. Explain how you think that MUG will change and how this will affect MUH. Illustrate this effect using marginal utility figures that show agents with and without children making different participation decisions (W>0 versus W=0) because of how having a child changes the MU of home goods. b. Next, consider instead the effects of children on MUc and MUw. Describe the reasons for the different shifts in the two curves. (If there are opposing forces, explain which you think will dominate.) Illustrate your prediction using marginal utility figures that show agents with and without children making different labor force participation decisions (W>0 versus W=0) because of how having a child changes the MU of consumption of market goods and/or work. c. Do you have the same predictions for the effects of children on men's marginal utility curves and work hours? Describe which marginal utility curves you think would shift for men when they become fathers and whether you expect the shifts to be larger or smaller (or differ in direction) than the shifts in marginal utility curves that women experience when they become mothers.Children and female labor supply - How can we put children in the labor supply model with home production? - Two main options, depending on how agents adapt - One option is to treat each additional child as an exogenous factor that increases (shifts up) the marginal value of time spent on home production (MUH} - Another option is for agents to purchase childcare services instead of producing it at home. In that case, children decrease the MUW [because wages need to cover the cost of childcare for additional work hours) Impact of a child on labor supply: higher MUH MUH with child Marginal utility Initial Initial MUH MUw MUNW* MU L=0; H=T L* = T- H* L=T; H=0 Leisure (L to R) / Home production (R to L) Work timeImpact of a child on labor supply: lower MUW Marginal ulitu.I Mum," L=0; H=T L" = T H' L=T; H=o Leisure [L to R] I Home production {R to L] Work time