 The real exchange rate, structural change, and female labor force participationBilge Erten and Martina Metzger World Development, 2019, vol. 117, issue C, 296-312 Abstract: While a large literature examines the role of fiscal policy in reducing gender gaps in labor market outcomes, scant evidence exists for the role of monetary and exchange rate policies in doing so. Recent studies have shown that targeting an undervalued real exchange rate stimulates economic growth by expanding tradable sector output. We examine whether such growth reduces gender gaps in labor force participation by improving labor market opportunities for women. Using a comprehensive cross-country dataset from 1960 to 2015 for a maximum of 103 countries, we test whether there is a robust relationship between currency undervaluation and female labor force participation. We find that countries that maintain an undervalued real exchange rate realize an increase in female labor force participation, and a corresponding decline in the difference between male and female labor force participation rates. This finding is particularly pertinent for developing countries and is robust to various specification checks as well as different estimation techniques. We also provide suggestive evidence that the operative channel is an expansion of female employment in manufacturing and industrial sectors. Our findings have important policy implications, particularly for countries in earlier stages of their development. Our results indicate that the positive effect of undervaluation on female labor force participation is stronger in developing countries, implying that there may be opportunities for interventions to target a more undervalued real exchange rate in these countries. Hence, competitive exchange rate policies matter not only for raising long-term growth potential, but also for reducing longstanding gender disparities in labor force participation. Keywords: Undervaluation; Female labor force participation; Structural change; Gender-specific labor market disparities; Sector-specific growth; Real exchange rate (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:117:y:2019:i:c:p:296-312 DOI: 10.1016/j.worlddev.2019.01.015 Access Statistics for this article World Development is currently edited by O. T. Coomes More articles in World Development from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.