Engines of Liberation Redux When Home Appliances Prices are Endogenous

We propose a model of the household where the transmission mechanism between home appliances and women’s labor supply is identical to the one in Greenwood, Seshadri, and Yorukoglu (2005) with one important exception. We explicitly model firms’ pricing and output choices in the appliances sector and thus, the price of home appliances is determined endogenously by the laws of supply and demand rather than being taken exogenously from outside the model. We use this new framework to characterize the general equilibrium effects of rising household wages on the price of home appliances, and thus ultimately women’s labor supply. The ratio between the price of home appliances and household wages declines following a rise in the wage level, which leads to widespread adoption of home appliances and increased labor force participation of married women. A numerical example shows that rising wages account for half of the increase in participation of married women between 1960 and 1970. ∗We thank two anonymous referees, Myong-Hun Chang, and Alice Schoonbroodt for their comments. All errors are ours. Correspondence: [email protected].