Julie L. Hotchkiss, M. Melinda Pitts, and Mary Beth Walker
Working Paper 2008-8
February 2008

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Recent trends in the labor force participation of women have brought much public attention to the issue of women opting out. This paper explores the decision of working women to exit the labor market at a time of major transition—the birth of a child—utilizing linked vital statistics, administrative employer, and state welfare records. The results indicate that, consistent with utility maximization theory, women are not just opting out but rather are accurately assessing the potential opportunity and direct labor market costs of their exit decisions and are making workforce exit decisions based on measurable costs and benefits.

JEL classification: J22, J21, C24

Key words: female labor force participation, children, firm and industry dynamics

The authors thank Lakshmi Pandey, Laurel Graefe, and Chunying Xie. They also thank seminar participants at University of Colorado at Denver for helpful comments. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content Julie Hotchkiss, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8198, julie.l.hotchkiss@atl.frb.org; M. Melinda Pitts (contact author), Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8930, melinda.pitts@atl.frb.org; or Mary Beth Walker, Department of Economics, Andrew Young School of Policy Studies, Georgia State University, P.O. Box 3992, Atlanta, GA 30302-3992, 404-413-0254, mbwalker@gsu.edu.

For further information, contact the Public Affairs Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8020.