Self-Employment, Workplace Flexibility, and Maternal Labor Supply: A Life-Cycle Model

This paper quantifies the value of self-employment as a flexible work alternative for mothers with young children and estimates how the additional flexibility affects women’s long-term employment and fertility. On average, self-employed women have more control over their work schedule, hours and location than wage and salary employed women. I incorporate self-employment into a life-cycle model of married women’s fertility and employment decisions and use data from the NLSY79 to estimate the value of self-employment flexibility for mothers. I find that mothers with preschool-aged children value the package of flexible amenities in self-employment at $7,000 annually, which represents around 20% of their average wage and salary earnings. A partial equilibrium counterfactual exercise suggests that self-employment flexibility encourages married women to continue working when they have young children, raising women’s median lifetime earnings by 2.5%. Overall, my findings offer evidence that inflexible work causes mothers to leave the labor force in response to the high costs of managing work and family. JEL: J13, J16, J22, and J24