The Puzzling Decline in Female Labor Force Participation in India: An Empirical Analysis

Abstract

Between 2005 and 2011, India witnessed high growth, declining levels of fertility and rising levels of education. This economic and demographic transition has been difficult to reconcile with the low and declining levels of female labor force participation, especially in rural areas, witnessed during the same period. This thesis assesses the determinants of the decline in female labor force participation in India between 2005 and 2011, using the information provided by state level gaps. It seeks to answer two questions: What are the factors that are influencing the decline and, will existing policy responses be sufficient to bring about a change in the near future.

Using a regression analysis and a Shapley decomposition, this thesis concludes that that there are several determinants of the decline. However, two key trends emerge from the results. There is clear evidence that the relative importance of economic variables as a determinant of female labor force participation has increased in the time period in question, with a higher relative influence in rural areas. Of these economic variables, local labor market conditions, measured by female unemployment, and education have witnessed the largest relative increase in explanatory power. At the same time, cultural factors have experienced a decrease in their relative importance as determinants of female labor force participation. Thus, while cultural factors and other economic factors still dictate female labor force participation rates, education and local labor market conditions, measured by female unemployment, have a greater role in explaining the the decline.

The implementation of a rural workfare program during the same period, The Mahatma Gandhi National Rural Employment Guarantee Scheme, provides a unique opportunity test the impact of an existing employment policy on female labor force participation. This thesis concludes that the MGNREGS, with its pro-women mandates, is a step in the right direction, but is by no means a panacea. What is required is a multifaceted intervention that targets both economic and cultural factors.