DP13792 The Armistice of the Sexes: Gender Complementarities in the Production Function

Author(s):	Raphael Espinoza, Jonathan D. Ostry, Chris Papageorgiou
Publication Date:	June 2019
Keyword(s):	aggregate production function, elasticity of substitution, Female Labor Force Participation, growth
JEL(s):	J24, O47
Programme Areas:	International Macroeconomics and Finance, Macroeconomics and Growth
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13792

Macroeconomic models have largely ignored the importance of gender diversity by assuming that male and female workers are perfectly substitutable in the aggregate production function. Whether this assumption is valid is an empirical question that this paper aims to answer by estimating the elasticity of substitution (ES) between the two types of labor. We apply linear and non-linear techniques to cross-country data at the aggregate level, to cross-country data at the sectoral level, and to firm-level data for the manufacturing sector in China. We find that women and men are far from being perfect substitutes: the ES is below 1 for the aggregate sample, between 1-2 for the sectoral sample, and between 2-3 at firm-level. We discuss why the ES may vary at different levels of aggregation and conclude on the implications of these results for growth accounting and for the gains from gender equality.