economics of gender chapter 5 assist.prof.dr.meltem ince yenilmez
TRANSCRIPT
Economics of Gender
Chapter 5
Assist.Prof.Dr.Meltem INCE YENILMEZ
Economic Tools and Economic Thinking
• Microeconomic ApproachA. Constrained optimizationB. Comparative statics
• FunctionsA. Utility functionB. Household production function
• Total and Marginal Functions• Supply & Demand• Empirical Methods
A. Regression analysisB. 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 0.• If Z , this causes X*.• Microeconomics:
– Economic actors choose endogenous variables to maximize something.
– 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– Qd = F(P; other P; Y; Preferences)– Negative slope.
• Law of Supply– Qs = 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 variable and one or more independent
variables– Example: Prediction from a demand function– Write as regression equation:– Qd = + P + • Qd/P = ; (1/ is slope of D curve)• is value of Qd when P = 0; (intercept)• is random error term
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:– 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
How can Economics be Used to Explain Marriage?
• Must be variation in marriage and divorce so that we have something to explain with our theory
• Must be benefits to marriage (and divorce)• Must be costs involved (transaction costs
and foregone costs)• Individuals must act rationally
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.
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: ZM and ZF
• For married-couple HH: ZMF
– Share of Output:• Amount of ZMF to husband = SM
• Amount of ZMF to wife = SF
Details on the Marriage Market
• NOT assuming that SM = SF
• Note: SM + SF = ZMF
• Marriage “rule”:– Marry if expect to be better off:– Male: marry if SM ZM
– Female: marry if SF ZF
• Implies that for a married couple:– SM + SF ZM + ZF
– So: ZMF ZM + ZF – Gains to marriage exist for most individuals.
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 # at low SF; larger # at high
SF).
Other Changes in Supply & Demand
• Increase in women’s wages:– Will ZF (well-being while single)
– Shifts S upward: • Each woman now willing to marry at a higher value of SF than before.
• No change in the vertical point
• More effective birth control:– ZF and ZM
• start with S2 and D2
• AIDS: start with S1 and D1