Using a multi-sector general equilibrium model with endogenous household labor supply decision, this paper proposes a framework to account for the declining female labor force participation (FLFP) rate and widening gender gap in labor force participation rates in China from the structural change and comparative advantage perspective. Based on a modified Roy-Ricardo model, I formally estimate female comparative advantage in the primary, secondary, and tertiary sectors, and document rising trends for the market sectors relative to home sector. The rising female comparative advantage in the market sectors is expected to drive more female workers to the workforce and makes the observed growing gender inequality in China’s labor market puzzling. I argue that the interplay between structural...[ Read more ]

Using a multi-sector general equilibrium model with endogenous household labor supply decision, this paper proposes a framework to account for the declining female labor force participation (FLFP) rate and widening gender gap in labor force participation rates in China from the structural change and comparative advantage perspective. Based on a modified Roy-Ricardo model, I formally estimate female comparative advantage in the primary, secondary, and tertiary sectors, and document rising trends for the market sectors relative to home sector. The rising female comparative advantage in the market sectors is expected to drive more female workers to the workforce and makes the observed growing gender inequality in China’s labor market puzzling. I argue that the interplay between structural change and female comparative advantage dynamics, instead of comparative advantage alone, determines the FLFP rate and the gender gap. FLFP rate is expected to drop when women have comparative advantage in the diminishing sector relative to the expanding one, and the effect from rising female comparative advantage in market sectors is not dominant. The theory can reconcile the increasing female comparative advantage in market sectors relative to home sector with the growing gender gap in China, can account for regional variations in FLFP rates, and can be flexibly applied to other economies to predict their FLFP rate trajectories.