Two Essays on Female Labor Force Participation


Student thesis: Master's Thesis

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Award date22 May 2019


The thesis consists of two essays. Both of them revolve around female labor force participation, and meanwhile they also focus differently.

The straightforward motivation of choosing this topic is that women are the labor force that cannot be ignored. When they participate in the labor market, they can contribute their talents and also speak for women’s needs. Female labor force is not a minority, and women should not face more obstacles than men when entering the labor market. However, women and men are not equally employed around the world, and the labor market is always more demanding for women. In order to improve or encourage female labor force participation, it is necessary to figure out its driving forces, and many recent researches have done so, listing quite a lot impact factors, such as fertility, housework, childcare, family income, female education, macroeconomic situations, social and cultural norms, etc. However, there is little consensus on their importance, or in other words, it is unclear that which factor is the core determinant and which one is actually less relevant. For solving this problem, the first paper studies the determinants of female labor force participation across countries by applying Bayesian model averaging, which systematically values all potential determinants and ranks their relevance. The empirical analysis involves 97 countries with complete data around the world and 31 variables obtained from the World Development Indicators. Based on the latest five-year average country-level data, the discouraged-worker effect of female unemployment on female labor force participation shows the most importance. When categorizing countries into different groups based on income, language and religion, the emphasis of these determinants will be different, indicating the economic or social backgrounds also matter. When repeating the same analysis every ten years, it is found that the determinants are not time-invariant, and different times will have different results.

Labor force participation rate and unemployment rate are two important indices that can quickly outline a labor market, and understanding the link between them can make it more clearly to see the nature and dynamics of unemployment during business cycles. Since the empirical results of the first paper also highlight the importance of the relationship between female labor force participation and female unemployment, the second paper intends to explore whether the effect of female unemployment on female labor force participation can still be confirmed when being analyzed from time angle. In other words, the second paper tries to investigate the long-run relationship between female unemployment and female labor force participation. There are three theories that make an assumption about the relationship between them: the discouraged-worker hypothesis, the added-worker hypothesis and the unemployment invariance hypothesis. The previous studies from different countries aimed to highlight the importance of the cultural and socio-economic factors as well as the institutional background, but the objects seemed to be skewed and a large part of the world were ignored. Therefore, the second paper tries to verify the correctness of the three hypotheses in different labor market settings, and applies a series of panel unit root testing, panel cointegration testing and the FM-OLS estimation to different country-cohorts. The countries will be categorized based on national income, women’s development, gender equality, women’s power, divorce risk and also from the geographical location perspective. The empirical results verify the informational value of unemployment in various labor market settings and provide intuitive comparisons. Generally speaking, the discouraged-worker effect is applied to most cases, so that the problem of hidden unemployment should get more attention. There are also exceptions. When facing a high female unemployment rate, less educated women may be more stressful and women in a more gender-equal society may be more optimistic. Little confidence caused by a lack of higher education or confidence brought by a society that is more respectful to women may lead to the occurrence of the added-worker effect in the female labor market. Thus, promoting gender equality is a good way to prevent hidden unemployment.