The causal effect of the number of children on gender‐specific labour supply elasticities to the firm

We estimate the effect of the number of children on the female and the male wage elasticities of labour supply to the firm using instrumental variables estimation in data from the US Current Population Survey (2000–19). Parents' number of children is instrumented with the sex mix of their first two children. We find that the male wage elasticity of labour supply to the firm significantly increases with the number of children, while the female elasticity is not significantly altered. That is, we find evidence that male labour markets become more competitive with the arrival of children. Our results also show that firms have substantial monopsonistic power and, in line with the monopsony theory of the gender pay gap, that male labour markets are more competitive than female markets.