Changing Business Cycles: The Role of Women's Employment

This paper studies the impact of changing trends in female labor supply on productivity,TFP growth and aggregate business cycles. We find that the growth in women’s labor supplyand relative productivity added substantially to TFP growth from the early 1980s, even if itdepressed average labor productivity growth, contributing to the 1970s productivity slowdown.We also show that the lower cyclicality of female hours and their growing share can account fora large fraction of the reduced cyclicality of aggregate hours during the great moderation, as wellas the decline in the correlation between average labor productivity and hours. Finally, we showthat the discontinued growth in female labor supply starting in the 1990s played a substantialrole in the jobless recoveries following the 1990-1991, 2001 and 2007-2009 recessions. Moreover,it depressed aggregate hours, output growth and male wages during the late 1990s and mid2000s expansions. These results suggest that continued growth in female employment since theearly 1990s would have significantly improved economic performance in the United States.