CREB - Center for Research in Economics and Business

Determinants of Female Labor Force Participation in Pakistan: An Instrumental Variable Approach
Mehak Ejaz

The thesis analyzed the determinants of female labor force participation across the rural and urban areas of Pakistan. It will provide cross sectional evidence on various aspects of women`s labor supply between the age (15-50), using the household data from Pakistan Social and Living Standard Measurement Survey (PSLM 2006-07). Women`s own characteristics(such as education endowments, marital status, age and fertility), household characteristics (such as family size, working people in the family, household income per capita, home appliances, co-residence and location; rural, urban, provincial, district) and women`s empowerment are the potential explanatory variables in the process of determination of female labor force participation (FLFP). However, women’s empowerment is subject to measurement constraints, therefore, gender wage gap and current assets has been utilized as proxy variables for women’s empowerment. Explanatory variables such as home appliances, fertility and co-residence are seemed to be endogenous that may cause biased and inconsistent results due to reverse causality. Average women’s ownership of home appliances in the region, gender of the first child, same gender of the first two children, proximity to clinic and contraceptive use, had been considered as the potential instruments respectively.

The Probit and Instrumental Variable (IV) approach had been adopted in order to tackle the endogeneity issue. The results discussed 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 repeated for Pakistan, Punjab, Sindh and NWFP along with their district dummies. Balochistan had not been covered due to data constraint. An inverse relationship of FLFP has been found for both fertility and gender-wage gap, whereas, a positive relationship is found for existence of home appliances in the house and co-residence. The thesis is at its final stages, the estimation is completed successfully and write-up is in process.