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Women Prefer Larger Governments: Growth, Structural Transformation, And Government Size

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  • TIAGO V. DE V. CAVALCANTI
  • JOSÉ TAVARES

Abstract

The increase in income per capita is accompanied, in virtually all countries, by two changes in the structure of the economy, namely an increase in the share of government spending in GDP and an increase in female labour force participation. This paper suggests that these two changes are causally related. We develop a growth model where the structure of the economy is endogenous so that participation in market activities and government size are causally related. Economic growth and rising incomes are accompanied by a greater incentive for women to engage in labour market activities as the opportunity cost of staying at home increases. We hypothesize that government spending decreases the cost of performing household chores such as, but not limited to, child rearing and child care so that couples decide to engage further in the labour market and chose a higher tax rate to finance more government spending. Using a wide cross-section of data for developed and developing countries, we show that higher participation by women in the labour market are indeed positively associated with larger governments. Furthermore, we investigate the causal link between the two variables using as instrumental variables a unique and novel dataset on the relative price of home appliances across OECD countries and over time. We find strong evidence of a causal link between participation in the labour market and government size: a 10 percent rise in participation in the labour market leads to a 7 to 8 percent rise in government size. This effect is robust to the country sample, time period, and a set of controls in the spirit of Rodrik (1998). The inclusion of an endogenous choice of government spending allows a considerable extension of the model in Galor and Weil (2000) so fertility can either rise or fall and phenomena like the baby boom and baby bust in Greenwood at el. (2002) can be addressed. In addition, the paper has important implications for the analysis of the secular as well as c

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 49 (2011)
Issue (Month): 1 (01)
Pages: 155-171

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Handle: RePEc:bla:ecinqu:v:49:y:2011:i:1:p:155-171

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  1. Jonah B. Gelbach, 2002. "Public Schooling for Young Children and Maternal Labor Supply," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 307-322, March.
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  3. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2003. "A meta-analysis of the international gender wage gap," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2003-11, Department of Economics, Johannes Kepler University Linz, Austria.
  4. Sherwin Rosen, 1996. "Public Employment and the Welfare State in Sweden," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 34(2), pages 729-740, June.
  5. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2002. "The baby boom and baby bust: some macroeconomics for population economics," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
  6. Oded Galor & David N. Weil, 1993. "The Gender Gap, Fertility, and Growth," NBER Working Papers 4550, National Bureau of Economic Research, Inc.
  7. Claudia Goldin, 1990. "Understanding the Gender Gap: An Economic History of American Women," NBER Books, National Bureau of Economic Research, Inc, number gold90-1, July.
  8. Greenwood,J. & Seshadri,A. & Yorukoglu,M., 2002. "Engines of liberation," Working papers, Wisconsin Madison - Social Systems 1, Wisconsin Madison - Social Systems.
  9. Fernández, Raquel & Fogli, Alessandra & Olivetti, Claudia, 2002. "Marrying Your Mom: Preference Transmission and Women's Labour and Education Choices," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3592, C.E.P.R. Discussion Papers.
  10. Iván Fernández Val, 2003. "Household labor supply: evidence for Spain," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 27(2), pages 239-275, May.
  11. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2005. "The Baby Boom and Baby Bust," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 183-207, March.
  12. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, American Economic Association, vol. 90(4), pages 806-828, September.
  13. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521662918.
  14. Florence Jaumotte, 2003. "Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries," OECD Economics Department Working Papers 376, OECD Publishing.
  15. Husted, Thomas A & Kenny, Lawrence W, 1997. "The Effect of the Expansion of the Voting Franchise on the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(1), pages 54-82, February.
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Cited by:
  1. Cavalcanti, Tiago V. de V. & Tavares, José, 2008. "The Output Cost of Gender Discrimination: A Model-Based Macroeconomic Estimate," Proceedings of the German Development Economics Conference, Zurich 2008 43, Verein für Socialpolitik, Research Committee Development Economics.
  2. García-Peñalosa C. & Konte M., 2014. "Why are women less democratic than men? Evidence from Sub-Saharan African countries," MERIT Working Papers 010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. James Rockey, 2009. "Who is left-wing, and who just thinks they are?," Discussion Papers in Economics, Department of Economics, University of Leicester 09/23, Department of Economics, University of Leicester.
  4. Magali Recoules, 2011. "How can gender discrimination explain fertility behaviors and family-friendly policies?," Review of Economics of the Household, Springer, Springer, vol. 9(4), pages 505-521, December.
  5. Casas-Arce, Pablo & Saiz, Albert, 2011. "Women and Power: Unwilling, Ineffective, or Held Back?," IZA Discussion Papers 5645, Institute for the Study of Labor (IZA).
  6. Joanna Alexopoulos & Tiago V. de V. Cavalcanti, 2006. "Cheap Home Goods And Persistent Inequality," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of G 165, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  7. Graziella Bertocchi, 2008. "The Enfranchisement of Women and the Welfare State," Discussion Papers, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy 4_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  8. Toke Aidt & Bianca Dallal, 2008. "Female voting power: the contribution of women’s suffrage to the growth of social spending in Western Europe (1869–1960)," Public Choice, Springer, Springer, vol. 134(3), pages 391-417, March.
  9. Kodila-Tedika, Oasis, 2013. "Femmes au pouvoir et Pouvoir des femmes : Qu’est-ce qui se passe en Afrique ?
    [Women in power and power of women: What is happening in Africa?]
    ," MPRA Paper 48776, University Library of Munich, Germany.
  10. Fernando Ferreira & Joseph Gyourko, 2011. "Does Gender Matter for Political Leadership? The Case of U.S. Mayors," NBER Working Papers 17671, National Bureau of Economic Research, Inc.
  11. Dalibor Eterovic & Toke Aidt, 2010. "Political Competition, Electoral Participation and Public Finance in 20th Century Latin America," Working Papers, Adolfo Ibáñez University, School of Government wp_001, Adolfo Ibáñez University, School of Government.

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