The link between economic growth and labor market participation is complex and elusive. Investments in female education are expected to increase women's productivity at home, but the relationship to labor force participation is less clear. Research has identified a U-shaped relationship where women leave the labor market at early stages of economic development and return when a white-collar sector develops (Sinha, 1967; Durand, 1975; Pampel & Tanaka, 1986; Goldin, 1995; Horton, 1996; Mammen & Paxson, 2000; Juhn & Ureta, 2003). This study replicates previous models using time-series analysis and consideration of large increases in female schooling over the past 30 years. The results suggest that investments in female education can overcome potential reductions in female participation due to increases in wealth, and policies to invest in girls' education appear to have benefits for labor markets, as well as family production.
JEL Classifications: J16, J24, 017, I28
Keywords: Female Labor, Girls' Education, Human Capital
Economic growth is expected to increase human capital in developing countries through investments in education and expanded labor markets. Investments in female education are particularly important for transforming economic growth into positive development outcomes as female literacy is linked to fertility, child health, and opportunities for women (Summers, 1994). While economic growth and female education have contributed to reduced fertility and improved child health, they have not consistently resulted in expansion of labor market opportunities for women.
International comparisons illustrate that female labor force participation is high in low-income countries and highly-developed countries, and relatively low in middleincome countries, creating a U-shaped relationship between national income and female participation. Theorists have attributed this relationship to changes in labor market structure (Sinha, 1967; Durand, 1975; Juhn & Ureta, 2003), social norms regarding the nature of women's work (Goldin, 1995), and cultural factors such as religion, social mobility, and family structure (Youssef, 1974; Semyonov, 1980; Horton, 1996). This study focuses on the important intervening effect of female education in the relationship between economic growth and female labor force participation. Theoretically, female education can increase productivity of women at home (Becker, 1975; 1985) or in the workplace (T.W. Schultz, 1960). In the past thirty years, developing countries have invested significant resources to expand female schooling (Hill & King, 1993; Herz & Sperling, 2004). Since girls' education is a preferred policy strategy to promote development (Summers, 1994; T.P. Schultz, 2002; Herz & Sperling, 2004), it is important to examine how these investments influence labor markets. If female education results in greater productivity at home, investments may accelerate the decline in female participation. Alternatively, if female education increases labor market opportunities for women, investments may counteract the negative effects of initial economic growth. Previous cross-sectional studies have controlled for female education, but longitudinal analysis has not given adequate consideration to the effect of changes in female schooling over time.
The relationship between education, women's work, and economic growth has profound implications for development policy. If the U-shaped curve is a typical development path, periods of economic growth may lead unexpectedly to reductions in female labor force participation. More interestingly, investments in girls' education may lead to even more dramatic reductions in the size of the labor force if the benefits of education accrue mostly in the home. It is still unclear how households and labor markets respond to girls' education. Longitudinal analysis is needed …