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Women Prefer Larger Governments: Female Labor Supply and Public Spending

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  • Cavalcanti, Tiago V. de V.
  • Tavares, Jose

Abstract

The increase in income per capita is accompanied, in virtually all countries, by two changes in the structure of the economy: an increase in the share of government spending in GDP and an increase in female labor force participation. This paper suggests that the changes in female labor force participation and government size are not just coincident in time, they are causally related. We develop a growth model with endogenous fertility, labor force participation and government size to illustrate this causal link. When government consumption and/or subsidies decrease the cost of performing household chores - including, but not limited to child rearing and child care - an increase in the female market wage leads to an increase in labor force participation by women and a demand for higher government spending. As women make the decision to work outside the home, they increase their demand for services typically provided by the government, such as education and health care, which, in turn, decrease the cost of home and family activities that are overwhelmingly performed by women. We show, for a wide cross-section of developed and developing countries, that higher female participation rates in the labor market are positively associated with larger governments. We investigate the causal link by instrumenting for female labor force participation with the prevalence of contraceptive methods and the relative price of household appliances. Female labor force participation is found to cause an increase in government size, with a 10 percent rise in the former leading to a 6.5 to 9 percent rise in the latter. This e.ect is stronger for government consumption than for government subsidies and is robust to the country sample, time period, and a set of controls in the spirit of Rodrik (1998).

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Bibliographic Info

Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp433.

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Length: 23 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unl:unlfep:wp433

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Keywords: Economic Development; Female Labor Supply; Government Size; Home Activities;

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References

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  1. 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, vol. 105(1), pages 54-82, February.
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  3. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521664103, April.
  4. Galor, Oded & Weil, David, 1995. "The Gender Gap, Fertility and Growth," CEPR Discussion Papers 1157, C.E.P.R. Discussion Papers.
  5. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  6. 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, vol. 90(4), pages 806-828, September.
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  8. Claudia Olivetti, 2006. "Changes in Women's Hours of Market Work: The Role of Returns to Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(4), pages 557-587, October.
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  10. John R. Lott & Jr. & Lawrence W. Kenny, 1999. "Did Women's Suffrage Change the Size and Scope of Government?," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1163-1198, December.
  11. A. Chevalier & T. K. Viitanen, 2002. "The causality between female labour force participation and the availability of childcare," Applied Economics Letters, Taylor & Francis Journals, vol. 9(14), pages 915-918.
  12. Patricia M. Anderson & Phillip B. Levine, 1999. "Child Care and Mothers' Employment Decisions," JCPR Working Papers 64, Northwestern University/University of Chicago Joint Center for Poverty Research.
  13. Sherwin Rosen, 1996. "Public Employment and the Welfare State in Sweden," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 729-740, June.
  14. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  15. Goldin, Claudia, 1992. "Understanding the Gender Gap: An Economic History of American Women," OUP Catalogue, Oxford University Press, number 9780195072709, September.
  16. Daron Acemoglu & David H. Autor & David Lyle, 2004. "Women, War, and Wages: The Effect of Female Labor Supply on the Wage Structure at Midcentury," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 497-551, June.
  17. 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, issue Nov.
  18. Jaisri Gangadharan & Joshua Rosenbloom & Joyce Jacobson & James Wishart Pearre III, 1996. "The Effects of Child-Bearing on Married Women's Labor Supply and Earnings: Using Twin Births as a Natural Experiment," NBER Working Papers 5647, National Bureau of Economic Research, Inc.
  19. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2005. "The Baby Boom and Baby Bust," American Economic Review, American Economic Association, vol. 95(1), pages 183-207, March.
  20. Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Comportamento econômico das mulheres
    by Roberto Ushisima in Empresas e Mercados on 2009-09-08 18:06:00
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Cited by:
  1. Tiago V. de V. Cavalcanti & José Tavares, 2004. "Assessing The "Engines Of Liberation": Home Appliances And Female Labor Force Participation," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 037, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Algan, Yann & Cahuc, Pierre, 2005. "The Roots of Low European Employment : Family Culture ?," CEPREMAP Working Papers (Docweb) 0512, CEPREMAP.
  3. Dalibor Eterovic & Cassandra Sweet, 2011. "How Women and Illiterates Shaped Education Outcomes in 20th Century Latin America," Working Papers wp_007, Adolfo Ibáñez University, School of Government.
  4. Aidt, T.S. & Eterovic, D.S., 2007. "Give and Take: Political Competition, Participation and Public Finance in 20th Century Latin America," Cambridge Working Papers in Economics 0714, Faculty of Economics, University of Cambridge.
  5. Tomas Kögel, 2006. "An explanation of the positive correlation between fertility and female employment across Western European countries," Discussion Paper Series 2006_11, Department of Economics, Loughborough University.

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