Tuesday, October 16, 2012

Why women should volunteer

There is a strong cultural tradition of volunteer work in the United States, which is encouraged by many employers and pretty much a requirement if you want to get into good colleges and land scholarships. I am not quite sure why this is more prevalent than in Europe, possibly because Europeans expect the state to help, whereas in the US everyone is more on his own and can expect help from other individuals. Beyond social pressure, there may also be self-interest at work, though.

Robert Sauer shows that for women volunteer work can pay off. Imagine the following scenario: a woman drops from the labor force to have children and raise them for the first years (remember, there is no significant maternity protection in the US). During that period, she volunteers here and there, when her schedule allows it. Once the kids are in school, she rejoins the labor force. Using the PSID, Sauer finds that every year of volunteer work increase the subsequent wage by 2.4% in full-time work, and even 8.3% for part-time work. That is of course after controlling for the years lost in learning-by-doing. This is also done with a structural behavioral model, which allows to highlight why reduced-form regressions would have shown a negative effect: adverse selection is at play in that a different type of people is out of the labor force and into volunteering. The advice to female labor economists is thus: volunteer and estimate structural models.

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