Extra Empirical Project Female labour supply and the macroeconomy

Learning objectives

In this project, you will:

  • download and clean customized excerpts from a database (Part 1)
  • merge different datasets (Part 1)
  • estimate recession periods from GDP data (Part 1)
  • understand how the Hodrick–Prescott (HP) filter can separate trend and cyclical components of a variable (Part 2)
  • compute business cycle properties of macroeconomic variables (Part 2)
  • interpret macroeconomic (aggregate) data (Part 2)
  • relate changes at the household level to macroeconomic phenomena (Part 2).

Key concepts

  • Concepts needed for this project: mean, standard deviation, correlation/correlation coefficient, and dummy variable
  • Concepts introduced in this project: recession dating, HP filter, and business cycles.

The authors of this project are:

Joern Onken: PhD scholar at the James M. and Cathleen D. Stone Centre on Wealth Concentration, Inequality, and the Economy at UCL.
Eileen Tipoe: Reader in Economics at Queen Mary University of London.

February 2024

Introduction

The increase in women’s participation in the labour market is one of the most striking socioeconomic shifts observed in many countries after the Second World War. This trend can be seen in both the extensive margin of labour supply (how many women are working in the market, called the labour force participation, or LFP, rate) and the intensive margin of labour supply (how many hours employed women are working, typically measured by hours worked per year). In the US, only 30% of women were in the labour force in the 1940s; by the 1990s, this figure had doubled to nearly 60%. Since then, women’s LFP has stagnated at this level, which is lower than that of men (around 70%).

Most economic research on this trend has attempted to explain why women increased their labour supply from the 1940s to the 1990s. Potential explanations include changing social norms, increased childcare opportunities, technological progress, and declining fertility rates.

In this project, we will instead explore the macroeconomic effects of the growth and subsequent flattening out of women’s participation in the labour market from the 1940s to the 2020s. Recent macroeconomic research has shown that differences at the micro (household) level have important implications for the macroeconomy. Our goal is to assess whether such a link also exists between growing female labour supply on the household side, and aggregate economic phenomena on the macro side. This project is based on a research paper by Professor Stefania Albanesi (Changing Business Cycles: The Role of Women’s Employment).

business cycle
Alternating periods of faster and slower (or even negative) growth rates. The economy goes from boom to recession and back to boom.

We will use household data on sex-specific labour supply, such as hours worked (intensive margin) and labour force participation (extensive margin), and relate them to macroeconomic data on business cycles. In doing so, we will separate the trend component of aggregate time series variables from their cyclical component. This is a common exercise in macroeconomics, as the trend component can be used to study long-term changes, while the cyclical component (fluctuations around that trend) indicates how the variable changes over the business cycle. We will then try to find explanations for puzzling features of recent business cycles, such as the productivity slowdown, the great moderation, and jobless recoveries.

Working in Excel

Working in R

Working in Google Sheets

Acknowledgements

The authors would like to thank Ravi Venugopal for his help creating the walk-throughs and instructions for Excel and Google Sheets.