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Households, Frictions, and Gender Gap: A Search Model of Labour Force Participation in India

Author

Listed:
  • Partha Chatterjee

    (Department of Economics, Shiv Nadar IoE, India)

  • Aakash Dev

    (National Council of Applied Economic Research)

Abstract

Why do nearly half of working-age adults in India, and three-quarters of women, remain outside the labour force? We address this question using a continuous-time joint household search model calibrated to Indian data. Households pool resources and make employment decisions under gender-asymmetric labour market frictions and unequal home-production responsibilities. Estimated transition rates from the Consumer Pyramids Household Survey reveal a labour market characterised by low job-finding and job-loss rates. We find that women’s reservation wages substantially exceed men’s. Counterfactual decompositions show that household responsibilities explain 45 percent of the gender gap, labour market frictions 35 percent, and interaction effects 20 percent. Reducing uncertainty and women’s household burdens significantly increases labour force participation.

Suggested Citation

  • Partha Chatterjee & Aakash Dev, 2026. "Households, Frictions, and Gender Gap: A Search Model of Labour Force Participation in India," NCAER Working Papers 190, National Council of Applied Economic Research.
    • Handle: RePEc:nca:ncaerw:190
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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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