Effects of Female Labor Force Participation on Growth and Inequality

Abstract

Taking as its basis Barro’s growth model, this paper carries out cross-country analysis on the effect of female labor force participation on economic growth and inequality by using the GMM-difference estimation technique of Arellano and Bond, which is based on a dynamic panel analysis. We find that when inequality index is taken into account as an explanatory variable in the economic growth regression, the effect of female labor force participation on economic growth is statistically insignificant while inequality affects growth negatively. On the other hand, the effect of female labor force participation on inequality is negative with strong statistical significance. This implies that inequality decreases as female labor force participation increases. In this sense, female labor force participation can indirectly affect growth positively through its impact on the decrease in inequality, which affects negatively economic growth.