A new GLO Discussion Paper documents that the rising trend in female labor force participation in Australia largely depends on changes in real wages, population composition changes, and changes in labor supply preference parameters.
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GLO Discussion Paper No. 543, 2020
Understanding the rising trend in female labour force participation – Download PDF
by Hérault, Nicolas & Kalb, Guyonne
GLO Fellow Nicolas Herault
Author Abstract: Female labor force participation has increased tremendously since World War II in developed countries. Prior research provides piecemeal evidence identifying some drivers of change but largely fails to present a consistent story. Using a rare combination of data and modelling capacity available in Australia, we develop a new decomposition approach to explain rising female labor force participation since the mid-1990s. The approach allows us to identify, for the first time, the role of tax and transfer policy reforms as well as three other factors that have been shown to matter by earlier studies. These are (i) changes in real wages, (ii) population composition changes, and (iii) changes in labor supply preference parameters. A key result is that –despite the ongoing emphasis of public policy on improved work incentives for women in Australia and elsewhere– changes in financial incentives due to tax and transfer policy reforms have contributed relatively little to achieve these large increases in participation. Instead, the other three factors drive the increased female labor force participation.
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