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Family labor supply, commuting time, and residential decisions

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Family labor supply, commuting time, and residential decisions Family labor supply, commuting time, of the Tokyo Metropolitan Areaq sity, Ki R23 a m ll-tim n’s pa are g ated t resen e Tok Several studies have investigated the relationship be- tween women’s employment and housing purchases. Yos- hikawa and Ohtake (19...

Family labor supply, commuting time, and residential decisions
Family labor supply, commuting time, of the Tokyo Metropolitan Areaq sity, Ki R23 a m ll-tim n’s pa are g ated t resen e Tok Several studies have investigated the relationship be- tween women’s employment and housing purchases. Yos- hikawa and Ohtake (1989), Fortin (1995), and Del Boca and Lusardi (2003) empirically examine how the working 1051-1377/$ - see front matter � 2011 Elsevier Inc. All rights reserved. be released due to the terms of usage of the data. I thank Kazuyasu Sakamoto, Yasuhiro Sato, and seminar participants at Nagoya University and Toyama University for helpful comments. This paper was presented at the 2009 Spring Meeting of the Japanese Economic Association at Kyoto University (June 6, 2009) and FESAMES 2009 Meeting at University of Tokyo (August 3, 2009). Remaining errors are my own. This research is supported by the Japan Society for Promotion of Science Grant-in-Aid for Scientific Research (Grant Number B-19330053 and C-20530188). ⇑ Fax: +81 11 706 4947. E-mail address: abey@econ.hokudai.ac.jp 1 Compton and Pollak (2007) also show that the concentration of power couples in MSAs declined slightly between 1990 and 2000. Journal of Housing Economics 20 (2011) 49–63 Contents lists available at ScienceDirect Journal of Housing Economics journal homepage: www.el doi:10.1016/j.jhe.2010.12.001 Area in Japan. I present an optimizing model of family la- bor supply and residential choices that incorporates an important institutional feature of the Japanese labor mar- ket: the decision by women to work full time or part time. The Tokyo Metropolitan Area is also unique in that real 1940 to 1990. They attribute this change to the colocation problem, i.e., the difficulty of finding a residence conve- nient to both spouses’ workplaces. In contrast, Compton and Pollak (2007) analyze panel data and show that power couples are no more likely than other types to migrate to large metropolitan areas. Accordingly, they argue that colocation is not a major cause of the concentration of power couples in large MSAs.1 Neither of these studies, however, is very explicit about the relationship between res- idential decisions and housing prices. q This paper uses microdata of the Employment Status Survey (ESS) made available through the Ministry of Internal Affairs and Communi- cation of Japan under Article 33-2 of the Statistics Act. Microdata cannot Keywords: Commuting Family labor supply Part-time work 1. Introduction How is women’s employment rel cal distribution of households? The p this question in a specific context: th o the geographi- t paper explores yo Metropolitan estate prices are much higher for locations close to the Central Business District (CBD). Costa and Kahn (2000) show that highly educated ‘‘power couples’’ in the United States became more likely to locate in the Metropolitan Statistical Areas (MSAs) from JEL classification: J22 R21 gests that high commuting costs could be one of the main obstacles for women’s full-time employment in places like the Tokyo Metropolitan Area. � 2011 Elsevier Inc. All rights reserved. Yukiko Abe ⇑ Graduate School of Economics and Business Administration, Hokkaido Univer a r t i c l e i n f o Article history: Received 19 January 2010 Available online 6 January 2011 a b s t r a c t In this paper, I build incorporates the fu explain why wome cantly in areas that and residential decisions: The case ta 9 Nishi 7, Kita-ku, Sapporo 060-0809, Japan odel of family labor supply and residential choices that explicitly e or part-time work decisions of married women. The model can rticipation patterns in full-time and part-time work vary signifi- eographically close but differ in real estate prices. The model sug- sevier .com/locate / jhec factors make full-time and part-time work very distinct, whereas the middle ground between these two options is almost nonexistent. The model shows that the housing market operates in a way to further strengthen this dis- crete feature in the labor market. Discreteness in the labor market can sometimes be mit- igated by other ‘‘markets.’’ For instance, if annual full-time earnings are higher than part-time earnings, in a multi- period setting full-time workers retire early but part-time workers retire late. Then lifetime earnings from the two The remainder of the paper is organized as follows. Sec- 50 Y. Abe / Journal of Housing Economics 20 (2011) 49–63 status of married women is related to housing purchases by their households. In the regional science literature, Mok (2007) asks whether incomes of spouses are pooled or not in deciding housing location. Using the Canadian Census data for the Toronto Metropolitan Area, she finds that incomes are not pooled for couples without children. Iwata and Tamada (2008) build a model of commuting behavior of married women and argue for a non-mono- tonic relationship between the wage rate of working mar- ried women and their commuting time. Sakanishi (2007, 2008) builds a model in which household location is deter- mined by the husband’s choice and the wife chooses her employment status given the husband’s location. In this paper, I present a model of family labor supply that permits married women to choose from full-time and part-time job opportunities. The commuting costs, wage levels, and working hours for the two employment options are explicitly modeled so as to reflect the real con- straints faced by couples in Japan. The model explains why the distribution of women’s employment status differs sig- nificantly across prefectures in the Tokyo Metropolitan Area. Although the theoretical model is constructed to ex- plain the facts for the Tokyo Metropolitan Area, the impli- cations of the model are broadly consistent with empirical patterns observed in the New York Metropolitan Area: evi- dence from the New York area is reported in the Appendix. The paper makes two novel contributions to the litera- ture. First, it explicitly considers the optimization over married women’s work (either full-time or part-time) and residential location. In modeling this, the ‘‘discrete- ness’’ of these two choices is particularly emphasized. This element of the model is especially relevant in the Tokyo Metropolitan Area, where full-time work is more common among women living close to the CBD than among women living in the suburbs. Such regional differences in partici- pation are not observed for men (Section 2). By modeling the family’s housing location and labor supply decisions simultaneously, this model provides a natural explanation for such patterns. Second, the paper highlights the importance of com- muting costs in understanding women’s work in Japan. Several important measures (legal and otherwise) to pro- mote women’s participation in the workplace have been adopted in Japan in recent decades (e.g., the Equal Employ- ment Opportunity Law, the Maternity Leave Law, and var- ious policies to make balancing work and family easier). Nonetheless, the proportion of women working in regular full-time jobs in Japan has not increased much, especially over age 40. Most of the increase in women’s employment after middle age has taken the form of non-regular, part- time work (Abe, in press). Commuting costs (including the time and energy necessary for commuting) have not fallen much for female workers in the past several decades, which may explain the sluggish increase in regular full- time employment for women. The unique aspect of the model is that it explicitly incorporates the discreteness of the labor market in terms of full-time or part-time status. In Japan, full-time wages are much higher than part-time wages. Furthermore, it is difficult for women who left the labor force at childbearing age to return to regular employment (Ueda, 2007). These tion 2 presents stylized facts on regional differences in la- bor market participation. Section 3 presents a model that explains the stylized facts. Section 4 provides numerical examples of the model and Section 5 concludes. The Appendix reports evidence from the New York Metropoli- tan Area. 2. Stylized facts 2.1. Discreteness in women’s employment choices: full-time and part-time work in the Japanese labor market To introduce the stylized facts to be explained in the theoretical model, I begin with an overview of full-time and part-time work in the Japanese labor market. In sub- sections 2.1 and 2.2, participation in the two types of wage–salary earners is considered: (1) regular full-time employees and (2) part-time and casual employees.3 Part-time and casual employees comprise the typical non- regular workforce in Japan and their numbers have in- creased dramatically in recent decades. According to the ESS, among women aged 25–59 years, the number of part- time or casual workers was 4.5 million in 1987 and 7.4 2 Abe (2009), albeit in a different setting from this paper, presents a model that explains this point. 3 In the data used in this paper, part-time and casual are the terms for employment status in the workplace. Both part-time and casual employees are non-regular workers. There is no clear distinction in tasks or working conditions for the two types of workers, although casual workers are generally younger than part-time workers. Students who work part time normally work under casual status. In the questionnaire of the Employment Status Survey (ESS, Statistics Bureau, Ministry of Internal Affairs and Communications of Japan), casual workers are referred to as ‘‘arbeit workers’’. employment statuses are more equalized than for single- period earnings, implying that intertemporal substitution mitigates discreteness in a single period.2 What is unique about the housing market in this paper is that it operates to magnify the discreteness in the labor market. The property whereby high-wage workers live close to the CBD whereas low-wage workers live farther from the CBD is common in many monocentric models because the bid-rent gradient is higher for high-wage earners. By con- trast, the model in this paper assumes that all men work at the CBD while women have the option to engage in part-time employment for which the commuting time is zero. In this model, the distance from the CBD creates larger differences on women’s behavior than for men’s. The large discrepancy in women’s behavior is caused by the discrete- ness in the labor market, magnified by the housing market. . 3 . 4 8 Regular Part-time arning urce: of the in Jap Y. Abe / Journal of Housing Economics 20 (2011) 49–63 51 million in 2007.4 Regular employees are those with no term limits in their employment contracts. Part-time and casual employees typically hold a contract of no longer than 1 year in duration, although such contracts are often renewed multiple times. Regular employees are eligible for employ- er-provided fringe benefits, including public pension contri- butions, a corporate pension, and employer-provided health insurance; part-time and casual employees are much less likely to obtain such coverage. Regular employees normally work 40 h/week or more, whereas part-time and casual employees work fewer hours. Hourly wage rates are higher for regular employees than for part-time employees; accord- ing to the statistics reported in Abe and Tanaka (2007), the part-time/full-time wage ratio for female workers in 2001 was 51%.5 Hereafter, the term ‘‘part-time workers’’ denotes both part-time and casual workers. Although the part-time/full-time wage gap is one source of the discreteness between the two options, a more 0 . 1 . 2 0 2 4 6 sh ar e Annual e Fig. 1. Earnings distributions of regular and part-time female employees. So in the ESS, and the horizontal axis of the figurecorresponds to the midpoint that appear in the figure are not evenly spaced. Data are from all regions important source is probably the so-called 1.03 million yen ceiling. The Japanese tax and Social Security system, as well as the fringe benefit policies of employers, creates an environment in which married women who are depen- dents of their husbands have a strong incentive to restrict their earnings to less than 1.03 million yen (for recent evi- dence on this, see, e.g., Nagase and Nawata, 2005; Akabayashi, 2006; Sakata and McKenzie, 2006; Abe, 2009). As a result, the annual earnings of married women are quite different depending on their employment status. Fig. 1 shows the earnings distributions for full-time and part-time working women from the ESS in 2007. Part-time earnings are heavily concentrated around 1 million yen, whereas full-time earnings show no such a concentration. Earnings are higher for full-time than for part-time work- ers; in the ESS data used in Fig. 1, the average earnings of 4 During the same period, the number of female regular workers in the same age range changed from 7.5 to 8.9 million. 5 An extensive literature on part-time jobs in Japan provides evidence of these issues; see, e.g., Houseman and Osawa (1998, 2003), Abe (2003), Gaston and Kishi (2007). female full-time employees are 3.3 million yen, whereas those of female part-time employees are 1.0 million. Fur- thermore, 93% of female part-time employees have earn- ings of less than 1.5 million yen, whereas 56% of female regular employees earn less than this amount. These are the main features of the discreteness in the two employ- ment choices for women in Japan. 2.2. Participation in full-time and part-time work by region To understand the features of regional variations in wo- men’s participation, I use the data from the ESS for 2007. The ESS is a household survey and the region-based statis- tics reported here are based on the place of residence (not on place of work).6 I compare the participation patterns for the four prefec- tures in the Tokyo Metropolitan Area: Saitama, Chiba, To- kyo, and Kanagawa. Tokyo prefecture includes the Tokyo 0 2 4 6 8 s (in million) EES 2007 (published version). Notes: The earnings are surveyed in intervals earnings interval. Since the intervals are not evenly spaced,the midpoints an. CBD; the other three prefectures are generally suburban, although they do contain some large cities such as Saitama (in Saitama prefecture), Yokohama and Kawasaki (in Kanagawa prefecture). In the following discussion, three measures of participa- tion are used: the employment-to-population ratio (E–P ratio), the regular employment ratio, and the part-time employment ratio. The regular employment ratio is the number of regular employees divided by the population, for which regular employees include regular wage and sal- ary earners, as well as executives of private corporations. The part-time employment ratio is the number of part- time and casual employees divided by the population. The three measures are plotted against age for married women (Fig. 2A–C) and the regular employment ratio for 6 The ESS is conducted every 5 years by the Ministry of Internal Affairs and Communications of Japan. In 2007, the survey was conducted for adults in about 450,000 households; the size of the original sample was approximately 1 million persons aged 15 and over. The ESS data do not contain information on the location of the employment. married men is plotted against age (Fig. 2D), using microdata from the ESS.7 The data show several interesting patterns. First, the E–P ratio for women below age 35 is high- er in Tokyo than in the three other suburban prefectures. This ratio is similar in all four prefectures after age 35. The types of female employment observed in the four regions are quite different: regular employment is more common in Tokyo, whereas part-time employment is more common in the other three prefectures, independent of age. Second, over 80% of married men work as regular full-time employ- ees, while less than 30% of married women work under such a status (Figs. 2B and D). Finally, the regular employment ra- 0. 4 0. 5 0. 6 0. 7 0. 8 0. 9 30 40 50 60Age Saitama Chiba Tokyo Kanagawa A. E-P Ratios of Married Women in Tokyo MA 0. 1 0. 2 0. 3 0. 4 30 40 50 60 Age Saitama Chiba Tokyo Kanagawa B. Regular Employment Ratios of Married Women in Tokyo MA 0. 1 0. 2 0. 3 0. 4 30 40 50 60Age Saitama Chiba Tokyo Kanagawa C. Part-time Employment Ratios of Married Women in Tokyo MA 0. 5 0. 6 0. 7 0. 8 0. 9 1 30 40 50 60Age Saitama Chiba Tokyo Kanagawa D. Regular Employment Ratios of Married Men in Tokyo MA Fig. 2. Employment-population ratio, regular employment ratio, and part-time employment ratio of married women and men in four prefectures in the Tokyo Metropolitan Area. Source: ESS 2007 (microdata). 52 Y. Abe / Journal of Housing Economics 20 (2011) 49–63 tio for men does not differ much across the four prefectures, although it is slightly lower in Tokyo than elsewhere. Over- all, the regional differences in women’s employment are clearly greater.8 It is natural to expect that these significant differences are caused by endogenous choice of residential location. Housing prices are higher in Tokyo and full-time employees earn much more than part-time employees. On the other hand, work schedules are less flexible for full-time jobs. High earnings by full-time working wives may be used to finance the high cost of housing close to the CBD. House- holds in which the wife does not work full time will locate farther from the CBD to spend less on housing. 2.3. Educational composition and labor supply choices across prefectures Most large-scale datasets for Japanese workers do not contain information on both wage and place of residence, so it is difficult to directly test the hypothesis in the previ- ous subsection. In this subsection, I therefore use educa- tion as a proxy for wage levels. It is well known that education is highly correlated with full-time wages. I first look at the proportion of educated people among residents, and then consider the proportion of educated workers among residents.9 Fig. 3 shows the proportion of people with more than a university education (16 years or more) among residents in the four prefectures by age group. Among both men and women of all age groups, the proportion of highly educated persons (‘‘power’’ individuals in the terminology of Costa and Kahn (2000) and Compton and Pollak (2007)) is high- est in Tokyo, followed by Kanagawa, Chiba, and Saitama. These data support the notion that high-wage earners tend to live closer to the Tokyo CBD. The educational distribution does not show whether la- bor supply is related to residential choice because the popu- 7 I omit the E–P ratio and the part-time employment ratio for married men because regional variations in the E–P ratio are smaller than those in the regular employment ratio and because the part-time employment ratio is low. 8 More generally, it is known that women’s participation in the labor market, especially with respect to regular full-time work, has significant regional variations within Japan (Takeishi, 2007; Abe et al., 2008). Regional variations are small for men. 9 Costa and Kahn (2000) define ‘‘power couples’’ as couples in which both spouses have more than a college degree. The available data do not allow me to investigate the combination of educational attainment of husband and wife. In this paper, ‘‘power’’ men and women are those who have at least a university degree, and ‘‘power working’’ men and women are those who have at least a university degree and work. 0. 1 0. 2 0. 3 0. 4 0. 5 30 40 50 60 Age Saitama Chiba Tokyo Kanagawa Share of residents with a university degree or more by Prefecture: Women 0. 5 0. 6 Share of residents with a university degree or more by Prefecture: Men ture in Y. Abe / Journal of Housing Economics 20 (2011) 49–63 53 0. 2 0. 3 0. 4 30 40 50 60 Age Saitama Chiba Tokyo Kanagawa Fig. 3. Share of residents with a university degree or more, by prefec 0. 2 0. 3 0. 4 0. 5 0. 6 0. 7 30 40 50 60 Proportion of power men amon
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