Effects of Trade on Female Labor Force Participation

This paper uncovers a counter-intuitive effect of international trade on female labor shares: whenever trade expands sectors intensive in female labor, female labor shares drop. When capital complements female labor more than male labor, the following mechanism operates: Expansions of sectors intensive in female labor come along with contractions of sectors intensive in male labor. Thus, male labor reallocates to the expanding sectors, where the capital labor ratio drops. Consequently, by the assumption on complementarities, the gender wage gap widens and female labor shares fall. Based on U.S.-Mexican trade flows, we provide empirical evidence in support of our theory.