Married women's labor supply and economic development: Evidence from Sri Lankan household data

• DOI: http://doi.org/10.1111/rode.12581
• Published date: 01 May 2019
• Author: Prathi Seneviratne
• Date: 01 May 2019

REGULAR ARTICLE

Married women's labor supply and economic

development: Evidence from Sri Lankan household

data

Prathi Seneviratne

Carleton College, Northfield, Minnesota

Correspondence

Prathi Seneviratne, Carleton College, 1

College Street, Northfield, MN 55057.

Email: pseneviratne@carleton.edu

Abstract

Women's labor supply in Sri Lanka has increased steadily

since the early 1990s following economic reforms, but

remains well below the level predicted by nationalincome, a

feature shared by a number of Asian and Latin American

countries that have undergone similar reforms and economic

growth. To understand the microeconomic determinants of

women's work in Sri Lanka's growing economy, this paper

estimates a binary‐choice model of married women's labor

supply using household survey data spanning a 23‐year per-

iod. Decomposition and cohort analysis reveal that women

have been drawn into the workforce through fa lling fertility

rates, rising tertiary education, and declining income effects

among younger generations, but other factors have under-

mined this positive trend. Educational attainment reduces

married women's labor supply except at the tertiary level,

consistent with social stigmas associated with married

women in non‐white‐collar employment. The strict sectoral

segregation of married women by education level supports

this hypothesis. In addition, growth hasbeen concentrated in

low‐skilled sectors with self‐employment more prevalent,

reducing employment prospects of educated women and

prompting their labor force withdrawal. This suggests it is

the structure of economic development, rather than speed,

that matters for women's labor force activity.

KEYWORDS

female labour supply, economic development, education, Sri Lanka,

decomposition

DOI: 10.1111/rode.12581

Rev Dev Econ. 2019;23:975–999. wileyonlinelibrary.com/journal/rode © 2019 John Wiley & Sons Ltd

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INTRODUCTION

Women's participation in the labor market has been receiving greater attention in the literature.

Pioneering research by Ester Boserup and Claudia Goldin sought to understand women's labor

market status in the context of economic development (Boserup, 1970; Goldin, 1995). They theo-

rized that the initial transition from agrarian to industrial societies reduces market opportunities for

women, prompting their withdrawal from economic activity. Further economic development

reverses this trend as female education catches up to men's, fertility declines, jobs become avail-

able for women in modern, “white‐collar”sectors, and social norms evolve towards greater accep-

tance of women in paid employment. Their hypothesis predicts a U‐shaped relationship between

female labor force participation and economic growth.

In line with this theory, female labor force participation rates in advanced industrialized coun-

tries have gradually increased over the last 4 decades and are now among the highest in the world

(ILO, 2017; OECD, 2017). Among emerging economies, however, patterns have been more varied.

In China, female participation rates have fallen rapidly since the early 1990s from their previously

high levels, especially among urban women (Hare, 2016). Participation has steadily declined in

India since the early 1980s, while remaining low and stagnant in Pakistan, the Middle East, and

North Africa (Ejaz, 2007; Lahoti & Swaminathan, 2016; Verme, Barry, & Guennouni, 2016). In

contrast, participation has steadily risen in Bangladesh (Husain, 2016), South Korea (Lee, Jang, &

Sarkar, 2008), Sri Lanka (LFS, 2017) and Taiwan (Cheng & Loichinger, 2017). In Latin America,

too, participation has increased, but remains low in Chile, Mexico and Nicaragua (Contreras &

Plaza, 2010).

These inconsistencies are a puzzle given these countries’shared experiences with structural

transition. In the latter part of the 20th century, developing countries implemented liberal economic

reforms and have become more integrated with the rest of the world. Ensuing economic growth

accompanied structural change that included declining fertility rates, gains in female education,

and a growing share of services in gross domestic product (GDP) (World Bank, 2017). The U‐

shape hypothesis says these changes should have had a predictable impact on female participation.

Yet, this theory was developed by observing groups of countries at a given point in time, rather

than a single country over its full development trajectory. Such cross‐sectional analyses mask

important information at the micro level. A small but growing body of country‐specific studies has

revealed a host of factors at the household, local and national levels that influence women's labor

market outcomes: these include marriage and household composition, local labor demand condi-

tions, geographic mobility, cultural norms, and institutional arrangements governing employment

and childcare.

This paper contributes to the microeconomic literature by analyzing the determinants and trends

of female labor force participation in Sri Lanka over the period 1992 to 2014. The study is impor-

tant for several reasons. First, Sri Lanka and its South Asian neighbors implemented broad eco-

nomic reforms in the early 1990s, bringing rapid growth and structural change to the region. Yet,

female participation has steadily risen in Sri Lanka and Bangladesh, while remaining low and stag-

nant in India and Pakistan. Identifying explanatory factors within historical and social context will

help policymakers appropriately target groups marginalized from the development process. Studies

show greater female employment generates productivity growth (World Bank, 2012), increases

women's bargaining power, and improves children's health and education (Luke & Munshi, 2011;

Lundberg, Pollak, & Wales, 1997; Majlesi, 2016; Qian, 2008), thereby setting the stage for futur e

growth. Yet, this topic has received little attention in the South Asian context.

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