The Rise of Female Labor Force Participation and Changes in the Wage Structure: Evidence from Structural Estimates in Mexico

This paper studies the effect of the rapid rise of female labor force participation on the Mexican occupational and wage structure over the last 25 years. The paper develops a equilibrium model of the labor market in which the... [ view full abstract ]

This paper studies the effect of the rapid rise of female labor force participation on the Mexican occupational and wage structure over the last 25 years. The paper develops a equilibrium model of the labor market in which the elasticity of substitution between male and female labor is allowed to vary depending on the task content of occupations, so that it is possible for changes in female labor supply to have heterogeneous impacts on relative earnings throughout the pay distribution. The parameters of the model are structurally estimated using Mexican household survey data covering the last quarter century. The estimates show that the elasticity of substitution between male and female labor is lower in low-paying manual and routine task-intensive occupations than in high-paying abstract task-intensive occupations. The implication is that the movement of women into the labor market in Mexico, one of the largest in the world during this period, has imposed a large burden on the wage growth of female workers, especially those with low levels of schooling. Favourable trends in the demand side of the economy have attenuated the supply-driven downward pressure on female wages at low-paying occupations, and fully counteract it at high-paying occupations.