This analysis of March 1993 Current Population Survey data suggests that managers with working wives earn lower wages than their counterparts with non-working wives. The labor supply decisions of managers' wives appear to be unaffected by (that is, “exogenous” with respect to) their husbands' wages. In contrast, there is evidence that the labor supply decisions of non-managers' wives are affected by their husbands' wages, and when the analysis takes account of that endogeneity, it is found that non-managers do not suffer a working spouse penalty. The analysis also highlights some important issues related to the use of instrumental variables.
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