Sex ratios and women's employment: Demand versus supply channels

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Both theoretical labor supply models and empirical analyses have shown that, as the sex ratio in a society declines, women are less likely to get married and their labor supply increases. Surprisingly, we know little about the impact of sex ratios on the demand for female labor: If faced with a reduction in male workforce, do employers turn to women to fill in the gap? Do women enter traditionally male occupations and hence does occupational gender segregation decline? Should we expect the gender pay gap to decline (as women would enter male occupations) or to increase (as male labor becomes scarcer)? Our paper has a threefold aim. First, we aim for a better understanding of the role of supply- versus demand-driven mechanisms explaining the rise in female employment in response to declining sex ratios. Either channel points to an increase in female employment. However, in a supply-driven process the intermediation of the marriage market is crucial, whereas in a demand-drive one, employment can increase directly, even if marriage rates change little. Secondly, we study the implications of the two channels for labor market outcomes that have not been considered in the previous literature, namely: occupational gender segregation; the gender gap in hours of work; the gender pay gap. Thirdly, our work helps explain an apparent puzzle, the high female labor force participation (FLFP) rates in Portugal, for several decades now, as opposed to the other Southern European countries. We exploit exogenous variation in population sex ratios driven by casualties from the Portuguese Colonial War and massive emigration in the 1960s. The instrumental variable procedure combines historic birth records, census micro data for Portugal and Spain starting in 1981, and for France, Germany and Switzerland starting in late 1960s, and individual records on Portuguese fatal war casualties during 1961-1974. We show that, as the sex ratio declined, FLFP increased significantly and women entered traditionally male-dominated occupations. Our estimated impact of sex ratios on marriage market suggests that the supply channel had little influence. We compare trends in Portugal to a “counterfactual” economy, Spain. Indeed, these two countries share similar social norms, political trends over the 20th century, and geographic conditions. Nevertheless, Portugal experienced a sharp increase in FLFP during the 60s and 70s relative to Spain (and many other OECD countries), while Spain remained a stronghold of the Southern European model of female labor market integration.