RELATIVE INCOME CONCERNS AND THE RISE IN MARRIED WOMENS EMPLOYMENT

We ask whether women's decisions to be in the workforce may be affecte d by the decisions of other women in ways not captured by standard mod els. We develop a model that augments the simple neoclassical framewor k by introducing relative income concerns into women's (or families') utility functions. In this model, the entry of some women into paid em ployment can spur the entry of other women, independently of wage and income effects. We show that relative income concerns can help to expl ain why, over some periods, women's employment rose faster than can be accounted for by the simple neoclassical model. We test the model by asking whether women's decisions to seek paid employment depend on the employment or incomes of other women with whom relative income compar isons might be important, including sisters and sisters-in-law The evi dence is largely supportive of the relative income hypothesis. (C) 199 8 Elsevier Science S.A. All rights reserved.