Does Gender Equality in Labor Participation Bring Real Equality? Evidence From Developed and Developing Countries

Over the past two decades developing countries have seen a rapid increase in the number of women taking an active role in the labor market. While acknowledging that this is an important development outcome, this paper cautions against the possible undesired distributional effects that it can trigger. Drawing on various macro- and micro-data sources, the authors presents robust evidence of an inverted U-shaped relationship between female labor force participation (FLFP) and inequality, which has not previously received an adequate attention from the literature. Overall, FLFP is found to have a strong and significant dis-equalizing impact in at least three groups of developing countries with relatively low initial levels of participation. A decile level analysis shows that FLFP has higher levels of returns among top deciles, where labor participation is higher, compared to the lower deciles. Among developed countries, Scandinavian and Euro-Mediterranean countries show a pro-equality effect of female labor participation, whereas other Northern European countries have displayed a dis-equalizing effect. This evidence focuses attention on the importance of developing pro-FPLP policies specifically targeting women belonging to lower deciles of the income distribution.