DP149 Unemployment and Female Labour Supply
Although the standard neoclassical model of female labour supply behaviour usually allows for the impact of demographic changes on value of female time in the household, the complexities of the tax and benefit system, and the influence of saving and borrowing on current period decisions, it does not allow for the possibility of involuntary unemployment. Women who are not working, that is, those who supply zero hours of labour, are assumed to do so voluntarily; the model does not allow for women who are not currently in employment and wanting to work but unable to obtain employment. This paper is an attempt to gauge how much the conclusions derived from the standard analysis of labour supply may have to be altered when we allow for such 'unemployed' workers. For the sample of married women in the UK which we investigate, the standard model appears to exaggerate the positive impact which reductions in marginal wages may have on participation and reduces the possibilities for a backward-bending supply curve of labour. The probability of being in a state of unemployment, as defined above, is found to depend on certain demand-side factors, age and a number of other demographic characteristics.