Female Labor Force Participation

By: Marie Naalsund Ingvaldsen
The main theme in the first issue of The Economist in 2010 is the increased female labor force participation rate (FLFPR) in the US, which is about to cross the 50 percent treshold within the next few months. This is celebrated as a victory for the gender equality and considered to be beneficial for the economy as a whole.
The picture is quite different in the Gulf region. In The World Bank’s MENA Development Report from 2004 it is stated that “MENA’s rate of female labor force participation is  significantly lower than rates in the rest of the world, and it is lower than would be expected when considering the region’s fertility rates, its educational levels, and the age structure of the female population.
This chart presents figures from 2007 for the countries in the Gulf region (exept Iraq where data was unavailable). The FLFPR range from 15 % in Saudi-Arabia and United Arab Emirates to 29% in Iran, which is still considerably lower than the observed 45% in the OECD countries.
Scientists debate the cause for the low FLFPR relative to other parameters used to measure gender equality in this region and a general line can be drawn between those in favor of an cultural explanation, and those advocating a more structural cause.
Michael L. Ross, professor at UCLA belongs to the second group. In his article “Oil, Islam and Women”, published in American Political Science Review in 2008, he argues that the causal effect goes through the large oil rents in the region: Assuming that women only works in the traded sector, e.g. the textile industry, high oil rents will reduce the traded sector’s ability to compete and force the female workplaces out of buisness. Consequently the demand for female labor, and hence the female wages are reduced. Men working in the oil industry will at the same time earn higher wages. This gives rice to  two effects that both have a negative effect on women’s decision on whether or not to enter the labor market.
When femal wages drop below the reservation wage, women prefer to stay home rather than participating in the labor market. This is the substitution effect. Leisure and household production become relatively more attractive. At the same time you have the positive effect on the households total income from higher male wages. The need of a second income in the household is reduced.
In his paper, Ross finds that oil rent has a significantly negative effect on women’s labor force participation, and that Islam, measured as the fraction of Muslims in the population, has no significant effect.
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