*Cancelled* CREDIT Seminar: Sonia Bhalotra (University of Warwick)

Women’s labour force participation and the distribution of the gender wage gap: An equilibrium model

Abstract:  We analyse how the rising labour force participation (LFP) of women influences the distribution of the gender wage gap. We develop an equilibrium model of the labour market in which the elasticity of substitution between male and female labour varies with the task content of occupations. We structurally estimate the model using data from Mexico between 1989 and 2014 when women’s LFP increased by fifty percent. We provide new evidence that male and female labour are closer substitutes in high-paying analytical task-intensive occupations than in lower-paying manual and routine task-intensive occupations. Consistent with this, we find a widening of the gender wage gap at the lower end of the distribution, alongside a narrowing towards the top. We also find that demand side trends favoured women, attenuating the supply-driven negative pressure on women's wages, and more so among college-educated workers in analytical-intensive occupations.

On the supply side, we find that increased appliance availability and declining fertility are drivers of increasing unskilled and skilled female LFP, respectively, and they led to countervailing wage effects, which pushed up the gender-wage gap. Additionally, we find that, due to imperfect gender labour substitutability and greater female wage elasticity, female skill-upgrading widened the gender LFP gap and reduced the gender wage gap, in contrast, rising emigration of unskilled men reduced the gender LFP gap and increased the wage gap.