Women, Wealth Effects, and Slow Recoveries

Masao Fukui, Emi Nakamura, Jón Steinsson

NBER Working Paper No. 25311
Issued in November 2018, Revised in March 2019
NBER Program(s):Economic Fluctuations and Growth Program, Labor Studies Program, The Monetary Economics Program

Business cycle recoveries have slowed in recent decades. This slowdown comes entirely from female employment: as women’s employment rates converged towards men’s over the past half-century, the growth rate of female employment slowed. We ask whether this slowdown in female employment caused the slowdown in overall employment during recent business cycle recoveries. Standard macroeconomic models with “balanced growth preferences” imply that this cannot be the cause, since the entry of women “crowds out” men in the labor market almost one-for-one. We estimate the extent of crowd out of men by women in the labor market using state-level panel data and find that it is small, contradicting the standard model. We show that a model with home production by women can match our low estimates of crowd out. This model—calibrated to match our cross-sectional estimate of crowd out—implies that 70% of the slowdown in recent business cycle recoveries can be explained by female convergence.

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w25311