On the relationship between female labour force participation and fertility in G7 countries: evidence from panel cointegration and Granger causality

This article examines the relationship between the female labour force participation rate and total fertility rate for the G7 countries from 1960 to 2006 using panel unit root, panel cointegration, Granger causality and long-run structural estimation. The article’s main findings are that the female labour force participation rate and total fertility rate are cointegrated for the panel of G7 countries; that long-run Granger causality runs from the total fertility rate to the female labour force participation rate and that a 1% increase in the total fertility rate results in a 0.4% decrease in the female labour force participation rate for the G7 countries.     

The causality between fertility and female labour force participation in Japan

This study examines the correlation and reverse correlation between fertility and female labor force participation in Japan during 1950-93. The model is logarithmic and follows earlier studies by Cheng (1996) and Hsiao's (1981) version of the Granger causality method. Data were obtained from the Japan Statistical Yearbook on total fertility rates and female labor force participation rates. Tests for cointegration revealed no cointegration between measures of fertility and employment. Findings indicate that the presence of children had a strong negative effect on labor force participation. Findings are consistent with the study by Yamada and Yamada (1986) and inconsistent with the study by Hamilton (1984), who found that fertility was positive and not significantly related to female labor force participation in Japan. Findings indicate that female labor force participation had a negative and insignificant effect on fertility. These findings support findings from studies by Sprague (1988) and Maddavi (1990) and contest findings of Hamilton (1984) and Yamada and Yamada (1986) that showed negativity and significance. The authors view their findings as correctly specified and supportive of a causality that favors fertility affecting labor force participation without feedback. Findings indicate that employment does not prevent or reduce the probability of having more children. Having young children at home does strongly discourage women from seeking employment outside the home.     

An investigation of cointegration and causality between fertility and female labour force participation

Both economists and demographers have long been interested in the nature of the relationship between fertility rate (BR) and female labor force participation (FR). Earlier work suggests an inverse relationship between BR and FR, except in preindustrial countries. The author applies Hsiao's version of the Granger causality method to examine the causality between BR and FR using transformed US data for the period 1948-93. An unidirectional causality is found to run from BR to FR with no feedback. These results confirm the hypothesis that the presence of small children discourages women from seeking employment outside of the home. Employment does not, however, affect a woman's decision to have children.     

Fertility and economic development: theoretical considerations and cross-country evidence

The paper presents a theoretical background for the analysis of the relationship between fertility and a number of socioeconomic factors associated with the process of economic development and analyses empirically this relationship within a cross-country framework. Fertility is found to be negatively related with female education, urbanization and family planning and positively related with the levels of infant mortality and economic development, whereas no significant relationship between fertility and female labour force participation is established. Sensitivity analysis is performed and the policy implications of the empirical findings are briefly discussed.     

Economic growth drag in the Central China: evidence from a panel analysis

This article employs recently developed panel methods to test for unit roots, cointegration and Granger causality to justify and estimate the drag induced by resource constraint and environmental pollution for the Central China. The results of the panel cointegration test show that there is a stable long run relationship amongst total output, capital, labour, land, water and SO₂ when total output is the dependent variable. The results of the causality test with Error Correction Model (ECM) analysis suggest that the available water resource and environmental pollutant have no impacts on total output temporarily, but in the long‐run there is a Granger causality running from these variables to total output, indicating the economic growth drag induced by the natural resource and environmental pollution can be further estimated. Given the stable cointegration and significant Granger causality being, the study shows that the drag on the total output reduces annual economic growth rate by about 1.1 percentage points for the Central China as a whole and there is a significant difference on the aggregated and disaggregated drags for the six provinces, which indicates that natural resource and environmental constraints so far incorporated into production probably have a modest effect over the past 31 years for the Central China.     

Fertility,Taxation and Family Policy*

Historically, there is clear evidence of an inverse relationship between female labour supply and fertility. However, the relationship across countries is now positive. Countries like Germany and Italy, with the lowest fertility, also have the lowest female participation rates. This paper analyses the extent to which this can be explained by public policy, in particular taxation and the system of child support. The results suggest that countries which have individual rather than joint taxation, and which support families through child care facilities rather than child payments, are likely to have both higher female labour supply and higher fertility.     

European women: why do(n’t) they work?1

To increase labour market participation is a major challenge currently faced by the EU, and attracting women into the labour force appears as a promising avenue to do so. Therefore, a clear understanding of what the factors influencing the evolution of female participation rates are in Europe is essential for a successful design of policy measures aiming at increasing participation rates. This article provides empirical evidence on the role that institutions have played in determining participation rates of women in the European labour markets. Our findings discard any doubt on the influence of institutions on women's participation in Europe. The strictness of labour market institutions negatively affects female participation rates. We also find that institutional features aimed at reconciling motherhood with professional life such as maternity leave schemes and part-time work favour participation rates of prime-age women. Additionally, fertility rates and education enrolment have been relevant for the evolution of participation rates during the sample period considered for prime-age and young females, respectively, while cohort effects drive the developments of older females.     

A time series model of fertility and female labour supply in the UK

Multiple time series procedures suitable for estimation and testing with nonstationary data are applied to UK data on age-specific fertility rates, age-specific female labour force participation rates, and women's and men's wages. Cointegration tests establish the existence of two long-run equilibrium relations, identified as a fertility relation and a labour supply equation, for each age group. Maximum likelihood estimates of these equations are consistent with the new home economics model of fertility, and tests of Granger-causality show evidence of extensive feedback among the variables.     

Temporal causality and the dynamics of democracy,emigration and real income in Fiji

This study is the first to explore temporal causality between democracy, emigration and real income in Fiji within a multivariate cointegration model. We find three long run relationships between democracy, emigration and real income. In the long run there is evidence that migration and democracy Granger cause real GDP in Fiji; real GDP and democracy Granger cause migration from Fiji and that real GDP and migration Granger cause democracy in Fiji. In the short run we find unidirectional Granger causality running from migration to real GDP and from democracy to real GDP, but neutrality between democracy and migration in the short run. We also extend the analysis to examine the degree of exogeneity of the variables beyond the sample period through considering the decomposition of variance and impulse response functions.     

Discouraged workers in developed countries and added workers in developing countries? Unemployment rate and labour force participation

Changes in the unemployment rate can have differing impacts on the labour force participation rate depending on the strength of the added worker effect and the discouraged worker effect. This paper documents the differences in the relationship between the unemployment rate and the labour force participation rate across a panel of developing countries and OECD countries. We employ a system GMM approach to control for and to establish the bi-directional causality between unemployment and labour force participation. We find that the discouraged worker effect does dominate in developed countries, while dominance of the added worker effect in developing countries leads to an increase in labour force in the face of rising unemployment.     

Fertility and economic development: theoretical considerations and cross-country evidence

The paper presents a theoretical background for the analysis of the relationship between fertility and a number of socioeconomic factors associated with the process of economic development and analyses empirically this relationship within a cross-country framework. Fertility is found to be negatively related with female education, urbanization, and family planning and positively related with the levels of infant mortality and economic development, whereas no significant relationship between fertility and female labor force participation is established. Sensitivity analysis is performed and the policy implications of the empirical findings are briefly discussed.     

The effect of real wages and inflation on labour productivity in Malaysia

This study examines the relationship between labour productivity, real wages and inflation in Malaysia using the bounds testing approach to cointegration and also the Granger causality test. The findings of this study suggest that inflation is negatively related to labour productivity. However, the effect of real wages on labour productivity is non-linear and the two have an inverted-U shape relationship. From a policy viewpoint, the Granger causality test shows that real wages Granger-cause labour productivity, but there is no evidence of reversal causation. Hence, the Malaysian dataset supports the claims by the efficiency wage theory. Moreover, we find that inflation and labour productivity in Malaysia have bilateral causality in the short- and the long-run.     

Dynamics of fertility and labour force participation of Canadian women in 1971 and 1981: a cohort approach

The authors analyze the relationship between labor force participation and fertility in Canada using data from the Public Use Sample Tapes from the 1971 and 1981 censuses. Factors considered include age, religion, educational status, and marital status. The authors conclude that "labour force participation of women seems to have less influence on fertility compared to [the] fertility effect on labour force participation."     

Does the unemployment invariance hypothesis hold for Romania?

This article questions whether the unemployment invariance hypothesis of Layard et al. (2005), which states that movements in labour force do not significantly affect unemployment rates, holds true for Romania. Using quarterly labour force data for the 1996–2012 period, we explore the time-series properties of the two variables. We find that unemployment rates and participation rates have unit roots, and that they are not cointegrated, meaning that no significant long-term relationship exists between them. The analysis carried out on the first differences of unemployment rates and participation rates shows discouraged and added worker effects for Romania’s female labour force. This conclusion diverges from findings that point out to a stable, long-term relationship between unemployment and participation in several developed countries (Japan, Sweden, USA) and shows that Romanian labour market is highly adaptive, where changes in labour force participation do not lead to increases in unemployment. This finding can help model the influence of adverse developments such as ageing and emigration, and show their true impact beyond demographic doom scenarios. It also points out the role played by labour demand in shaping the evolution of the Romanian labour market.     

Unemployment and labour force participation in Turkey

This article investigates the relationship between labour force participation rate and unemployment rate in Turkey a developing country. Cointegration analysis is carried out for the aggregate and gender-specific series. The findings indicate that there is no long-run relationship between labour force participation and unemployment rates in Turkey. Thus, unlike in the case of the developed countries, the unemployment invariance hypothesis is supported in Turkey.     

Real wages,inflation and labour productivity in Australia

This article presents an analysis of real wages, inflation and labour productivity interrelationships using cointegration, Granger causality and, most importantly, structural change tests. Applications of tests to Australian data over the 1965 to 2007 period corroborate the presence of a structural break in 1985 and show that a 1% increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0.5% and 0.8%. Comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance. Granger causality test results suggest that real wages and inflation both Granger cause productivity in the long run.     

Attendance and pricing at sporting events: empirical results from Granger Causality Tests for the Melbourne Cup

This study applies Granger causality tests to examine the relationship between attendance, admission prices and real income at the Melbourne Cup, which is Australia’s premier horseracing event and one of the world’s leading handicap races. The motivation for the paper is that while market demand suggests that causation should run from admission price to attendance, it is equally plausible that sporting authorities could alter admission prices in response to a change in demand reflected in attendance. The main findings are that in the short-run there is unidirectional Granger causality running from income to attendance, attendance to admission price and income to admission price, while in the long run both admission price and income Granger cause attendance.     

Foreign direct investment and growth in India: a cointegration approach

The two-way link between foreign direct investment and growth for India is explored using a structural cointegration model with vector error correction mechanism. The existence of two cointegrating vectors between GDP, FDI, the unit labour cost and the share of import duty in tax revenue is found, which captures the long run relationship between FDI and GDP. A parsimonious vector error correction model (VECM) is then estimated to find the short run dynamics of FDI and growth. Our VECM model reveals three important features: (a) GDP in India is not Granger caused by FDI; the causality runs more from GDP to FDI; (b) trade liberalization policy of the Indian government had some positive short run impact on the FDI flow; and (c) FDI tends to lower the unit labour cost suggesting that FDI in India is labour displacing.     

Demographic links to savings in life cycle models: identification of issues for LDCs

The author considers the potential for a link between the recent pattern of demographic transition and intertemporal and inter-country variations in savings rates. Fertility, infant mortality, life expectancy, and levels of female and child labor force participation are among the various demographic factors which affect national savings rates through their effects upon age structure, age-specific individual savings behavior, and their general equilibrium effects upon interest rates, wage rates, and income distribution. The author establishes a simple discrete time life cycle model of savings, explains the issues related to age structure, and discusses the effect of age-specific savings functions, the general equilibrium effects of demographic factors, the effects of life expectancies and child mortalities, and the nature of social security coverages in less developed countries, as well as issues which are especially important for less developed countries. A new strategy for empirically evaluating demographic policies is proposed. That is, one can estimate the age profile of earnings, saving and fertility rates from household survey data. The life tables can then be used to compute the aggregate savings rate and population size. Any demographic policy which affects the fertility rate, life expectancy, and investment in the quality of children will change the aggregate saving and population growth rates. These two aggregate effects could be compared to evaluate demographic policies. The author stresses, however, that changes in different demographic factors will have different short-run and long-run effects upon the savings rate which will also depend upon whether such changes are transitory or permanent.     

Fertility and the puzzle of female employment in the Middle East and North Africa

Female labour force participation rates across the Middle East and North Africa (MENA) region have remained low for over four decades even though, in the same period, women's education rapidly increased and fertility rates substantially decreased. This study provides a better understanding of this surprising phenomenon by testing whether the number of children affects the mother's labour supply (using twins at first birth as an instrumental variable.) Despite a strong first stage, it does not find statistically significant effects in the second stage, even in the combined sample of over 100,000 observations. This non‐result, however, does not rule out that fertility affects women's employment in these countries. But it rejects impacts larger than 0.09. Similar twin‐studies in the United States found effects between 0.12 and 0.31. The paper discusses the implications of this result in understanding the puzzle of female participation in MENA and in designing policies to increase women's employment.