WSE internal seminar
In 1990, at the onset of transition, the female employment ratio in former communist countries was up to 20 percentage points above the employment ratio of women in Western European economies. Thirty years later, the positions are inverted. Women in transition countries lag behind women in advanced economies, and closing the breach appears as a long-term goal. So, what had happened over those years? This is the question that we seek to answer with our research paper, which in this occasion we discuss at an internal seminar with Professors from the Warsaw School of Economics.
To answer this question, we collected as many micro level databases from transition economies as we could get, from Labor Force Surveys to suveys conducted by international institutions, like the World Bank. We managed to get over 1400, which makes our research unique in terms of the number of countries and years covered. Equipped with these data, we seek to explore the role played by two elements: work orders and opportunity costs of working.
As the name indicates, work orders were orders to work, that is the state assigned workers to their employment positions after completion of education. These orders could have affected labor supply in several ways. First, and most obvious, it compel individuals to work. Second, the system also helped to solve some of the frictions inherent to labor market transitions. More importantly, it eliminated biases in the selection process, i.e. no statistical discrimination by the employer was possible. Removing work orders, as it happened at the beginning of transition, might have had two effects: an increase in frictions (which one can expect to be particularly large in the early years of transition) and an increase in flexibility to not work. In order to disentangle the effects, we compare the outcomes of women along the age distribution, and how these outcomes change over time. We find evidence suggestive that the second channel was more important.
The opportunity cost of working (and not working) play a prominent role in explaining the raise in female employment in advanced economies. These costs refer both to access to institutionalized care, which reduced the opportunity cost of working, and also to changes in the skill composition of women (higher proportion of more educated women), which raised the opportunity cost of non-working. A series of regressions confirms that these costs were significant in advanced economies, yet in transition countries, they played only a negligible role. Sometimes, they even run in opposite directions. We explore whether this was something inherent to transition countries, or whether it was related to the lower employment gap between men and women was smaller in transition economies. Quantile regressions showed that the second interpretation is likely the right one. This suggests that as the gap becomes close to zero, changes in the opportunity costs needed to further reduce the gap will be much larger.
The discussion following the seminar focused around two issues. First, the characterization of opportunity costs. Ideally, one would like to measure them using more complex indices, which in the context of transition were not fully available. Second, it was emphasized the need to be more granular. Neither transition nor advanced countries constitute homogeneous groups. It was then suggested that add extra robustness checks exploring this possibility. We thank you all for the comments and we will work so that the final version meets your expectations.