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Women Prefer Larger Governments: Female Labor Supply and Public Spending

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

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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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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  1. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  2. Case, Anne & Paxson, Christina, 2001. "Mothers and others: who invests in children's health?," Journal of Health Economics, Elsevier, vol. 20(3), pages 301-328, May.
  3. Jeremy Greenwood, 2003. "Technological Progress and Economic Transformation," Annual Meeting Plenary 2003-2, Society for Economic Dynamics.
  4. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918, October.
  5. Joyce P. Jacobsen & James Wishart Pearce III & Joshua L. Rosenbloom, 1999. "The Effects of Childbearing on Married Women's Labor Supply and Earnings: Using Twin Births as a Natural Experiment," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 449-474.
  6. Daron Acemoglu & David H. Autor & David Lyle, 2002. "Women, War and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century," NBER Working Papers 9013, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Jeremy Greenwood & Ananth Seshadri & Mehmet Yorukoglu, 2003. "Engines of Liberation," RCER Working Papers 503, University of Rochester - Center for Economic Research (RCER).
  10. Claudia Goldin, 1990. "Understanding the Gender Gap: An Economic History of American Women," NBER Books, National Bureau of Economic Research, Inc, number gold90-1, December.
  11. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2002. "The Baby Boom and Baby Bust," Economie d'Avant Garde Research Reports 1, Economie d'Avant Garde.
  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, vol. 90(4), pages 806-828, September.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. Galor, Oded & Weil, David N, 1996. "The Gender Gap, Fertility, and Growth," American Economic Review, American Economic Association, vol. 86(3), pages 374-87, June.
  18. 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.
  19. Claudia Olivetti, 2005. "Changes in Women's Hours of Market Work: The Role of Returns to Experience," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-008, Boston University - Department of Economics, revised Jun 2006.
  20. 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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