Job Market Paper

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The Independent Woman – Locus of Control and Female Labor Force Participation

(last update February 2019)

Abstract Research on female labor force participation has a long tradition in theoretical and empirical economic research. While a lot of open questions have been answered on the gender gap in labor market participation, the prevalent heterogeneity between women still keeps economists and politicians busy. While traditional economic theory attributed unexplained differences in decision-making to idiosyncratic shocks, more modern approaches are more and more informed by psychology and thus consider individual differences in tastes, preferences and beliefs as important drivers of decision making. This paper contributes to this research in the context of female labor force participation by theoretically and empirically discussing the role of the personality trait locus of control (LOC) for differences in participation probabilities between women. LOC is a personality trait that measures an individual’s belief about the causal relationship between one’s own behavior and its consequences for life. In line with the existing literature, especially a crucial importance of LOC for independence preferences as well as subjective beliefs about future outcomes are proposed. The connection between LOC and participation decisions is tested using German survey data from the SOEP in a reduced form approach, finding that internal women are on average more likely to be available to market production at a given point in time. Thus, LOC adds explanatory power in addition to commonly known traditional socio-economic determinants of participation. Additionally, a heterogeneity analysis identifies a strong sensitivity of the relationship with respect to underlying monetary constraints as well as social working norms and traditional gender roles.