A Dynamic Model of Female Labor Force Participation Rate and Human Capital Investment

This paper develops a dynamic model of human capital investment and labor participation. The main focus is on the fact that women’s labor force participation rate is U-shaped over the course of development. We also analyze the behavior of the relative education levels of men and women, the education levels of women in the labor force and outside of it, and the magnitude and sign of income and wage effects. The underlying assumption of the model is the existence of economies of scope in the traditional sector of the economy. This creates a tradeoff between remaining in traditional production where farm work and child rearing can be undertaken simultaneously, and moving to modern production where income is potentially higher.