Why Did Indian Female Labor Force Participation Decline? : Evidence From a Model of Household Labor Supply

Between 1983 and 2011, Indian married women's labor force participation (LFP) declined from 35% to 24%, even while the economy grew, educational attainment rose, and fertility fell. To study this decline in LFP, I use India's National Sample Survey to construct a unique sample of matched husband-wife pairs. The economics of household labor supply suggests that the explanation may lie in rising husbands' incomes that exert a negative income effect on wives' LFP. Two-stage least squares estimates of a model of household labor supply reveal positive wives' own-wage elasticities, rising from 0.25 in 1983 to 0.67 in 2011, and negative cross-wage elasticities, "rising" from -0.54 in 1983 to -0.75 in 2011. Estimating the model for the period as a whole, trends in wives' wages imply an increase in women's LFP of 8.6 percentage points, and trends in husbands' wages imply a decrease of 20.8 percentage points, for an overall decline of 12.2 percentage points