Determinants Of Female Labor Force Participation In Pakistan: An Instrumental Variable Approach.

Abstract

This thesis analyzes the determinants of female labor force participation (FLFP) across the rural and urban areas of Pakistan and its provinces. The thesis provides evidence on various aspects of women`s labor supply by utilizing the cross sectional data of women between the age 15-50 from the household data - Pakistan Social and Living Standard Measurement Survey (PSLM 2006-07). Women`s own characteristics, household characteristics and women`s empowerment indicators are the potential explanatory variables in the determination of female labor force participation. Own characteristics include age, educational endowments, marital status, and fertility whereas family size, working people within family, endowment of appliances, co-residence and per capita household income are categorized as household characteristics. As, women’s empowerment is subject to measurement constraints, therefore, gender wage gap and current assets are utilized as proxy variables for women’s empowerment. Further, attributes of location such as rural, urban, district are also used as determinants of FLFP.

Explanatory variables such as possessed home appliances, fertility and co-residence are seemed to be endogenous that may cause biased and inconsistent results due to reverse causality. Therefore, average ownership of home appliances in the locality, gender of the first child, same gender of the first two children, proximity to clinic, contraceptive use, and housing information are considered as the potential instrumental variables. The Probit and Instrumental Variable (IV) approach is adopted to tackle the endogeneity issue. The results discuss the estimates of endogenous covariates separately in the first stage using instrumental variable approach and then the vector of IV has been utilized to show the impact of explanatory variables on dependent variable, FLFP. This exercise is repeatedly done for overall Pakistan, Punjab, Sindh and NWFP. Baluchistan is not covered due to data constraints. An inverse and significant relationship of FLFP is found for both fertility and gender-wage gap, whereas, a direct and significant relationship is found for existence of home appliances in the house and co-residence.