Sequential Potential Outcome Models to Analyze the Effects of Fertility on Labor Market Outcomes

Abstract

This paper proposes to use dynamic treatment models to analyze the effects of fertility on labor market interactions. It argues that when large data sets are available the dynamic potential outcome model is an interesting modeling framework because it allows the careful consideration of the selection issues coming from the interaction of fertility and labor market decisions at different ages. It allows explicitly considering their dependence on the labor market and fertility history realized up to that period. There is no need to collapse the ‘endogeneity’ problem into a static setting since the dynamic nature and timing of the interaction can be explicitly addressed. Furthermore, the paper argues that this approach allows defining relevant parameters of interest in a more precise way. Based on artificial data, the approach is implemented and issues that may come up in practical applications of this approach are discussed.