Female labour market participation and economic growth

This paper investigates the impact of economic growth on the dynamics of gender inequality in the labour market. Economic studies suggest a positive impact of female labour market participation on growth but the impact of growth on women's labour market participation is not as clear. Recent cross-country studies assume that economic growth first lowers female labour market participation and then increases it in the long-run ( the 'feminisation U') but do not give precise estimation results. This study tests the hypothesis of the 'feminisation U' based on a panel data set (combination of cross country and time series data) which allows to control for problems of endogeneity. The econometric analysis confirms the hypothesis of a 'feminisation U'. This indicates that it is not sufficient in the short-term to rely on the equalising effects of economic growth to increase the entry of women into the labour force. Active labour market policies are needed particularly in developing countries to promote women's labour market participation in the interest of overall economic growth.