Gender Gaps and the Rise of the Service Economy∗

This paper explains the narrowing of gender gaps in wages and market hours in recent decades by the growth of the service economy. We propose a model with three sectors: goods, services and home production. Women have a comparative advantage in the production of services in the market and at home. The growth of the services sector, in turn driven by structural transformation and marketization of home services, acts as a gender-biased demand shift and leads to a rise in women’s wages and market hours relative to men. Quantitatively, the model accounts for an important share of the observed rise in women’s relative wages and market hours and the fall in men’s market hours. Finally, model predictions are confirmed on U.S. evidence on the impact of the rise in services on gender outcomes. JEL codes: E24, J22, J16.