The Role of Structural Fiscal Policy on Female Labor Force Participation in OECD Countries

This paper examines the role of structural fiscal policies to promote female labor force participation and reduce gender gaps in labor markets in 26 OECD countries from 2000 to 2019. As both female labor force participation and many explanatory/control variables clearly exhibit non-stationarity (potentially leading to spurious regression results), we employ a panel vector error-correction model, in contrast with most previous empirical studies on this matter. Our analyses confirm statistically significant positive impacts of government spending on (1) early childcare and education, (2) active labor market programs, and (3) unemployment benefits, all of which would help encourage women to enter the labor force, while (4) an increase in relative tax rate on second earner could have negative impact on female labor force participation.