Working Paper: CEPR ID: DP13792
Authors: Raphael Espinoza; Jonathan D. Ostry; Chris Papageorgiou
Abstract: Macroeconomic models have largely ignored the importance of gender diversity by assuming that male and female workers are perfectly substitutable in the aggregate production function. Whether this assumption is valid is an empirical question that this paper aims to answer by estimating the elasticity of substitution (ES) between the two types of labor. We apply linear and non-linear techniques to cross-country data at the aggregate level, to cross-country data at the sectoral level, and to firm-level data for the manufacturing sector in China. We find that women and men are far from being perfect substitutes: the ES is below 1 for the aggregate sample, between 1-2 for the sectoral sample, and between 2-3 at firm-level. We discuss why the ES may vary at different levels of aggregation and conclude on the implications of these results for growth accounting and for the gains from gender equality.
Keywords: female labor force participation; aggregate production function; elasticity of substitution; growth
JEL Codes: O47; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Female Labor Force Participation (FLFP) (J21) | GDP (E20) |
| Male Labor Force Participation (MLFP) (J49) | GDP (E20) |
| Gender Roles (J16) | Elasticity of Substitution (ES) (C20) |
| Sectoral Differences (L52) | Elasticity of Substitution (ES) (C20) |
| Gender Diversity (J16) | Economic Growth (O49) |
| Female Labor Force Participation (FLFP) (J21) | Total Factor Productivity (TFP) Growth (O49) |