To Work or Not To Work? Male Earnings and Female Labor Force Participation in India

Despite economic growth, fertility reductions, and increases in female educational attainment, overall female labor force participation in India declined from 35 percent to 27 percent between 1999 and 2012. I examine the degree to which this puzzling decline can be attributed to an increase in earnings of married males. I first show that between 1999 and 2012, districts that experience a relatively large increase in earnings of married males also experience a large decrease in married female labor supply. Then, I use the within-district variation in earnings between different male labor markets to estimate the relationship between married male earnings and labor supply of married females over time. In addition to the district-level analysis, I also estimate this cross-price elasticity of female labor supply from a household-level fixed effects model using the Indian Human Development Survey. All three sources of variation in male earnings generate robust and negative estimates of the relationship between married male earnings and labor force participation of married females in India. The estimated elasticity ranges between -0.53 and -1.7. I also find that apart from married females, there is a reallocation of labor for other secondary workers in the household. Moreover, I find no relationship between labor supply of unmarried females and earnings of married males, which is suggestive of an income effect driving the observed relationship. Back-of-the-envelope calculations suggest that increase in married male earnings during 1999-2012 may explain over forty percent of the recent decline in labor force participation rates of married females.