The role of social interactions and strength of ties to increase labor participation among women with low education levels in Chile

This article studies cultural factors that could explain the low rates of female labor force participation (FLP) observed in Chile. In particular, the aim of this study is to quantify the causal effect of social interactions among female neighbors on women’s individual decision regarding whether to participate or not in the labor market. To do so, I follow the literature on discrete choice with social interactions and expand a standard model of FLP by including the labor choices of other women living in the same neighborhood. In order to identify the causal effect, I exploit the geographical location of households by constructing a unique dataset that merges the FLP rates at the census zone level from the Chilean Census to the surveyed women in the Chilean Longitudinal Social Study (ELSOC) in 2017. I use the FLP rate of adjacent census zones as an instrument for the FLP rate of female neighbors living in the same census zone. To analyze the heterogeneity of the effect, an index of the strength of the ties within neighbors is constructed and the model is estimated for women with weak and strong ties within the neighborhood, separately. The results indicate the presence of significant and positive social effects only for low-skilled women who have weak ties within the neighborhood of residence. This is consistent with the theory of social ties, as weak ties act as a bridge between low-skilled women and both new information and social networks that could be relevant to participate in the labor market. These results are relevant as the existence of this social effect implies a social multiplier that can be used for policy to expand the effect of programs of small scale.