European Department and Strategy, Policy, and Review Department
Copyright © 2016
International Monetary Fund
Names: Christiansen, Lone Engbo. | Lin, Huidan. | Pereira, Joana. | Topalova, Petia. | Turk Ariss, Rima. | Koeva, Petya. | International Monetary Fund. | International Monetary Fund. European Department. | International Monetary Fund. Strategy, Policy, and Review Department.
Title: Unlocking female employment potential in Europe: drivers and benefits / Lone Christiansen, Huidan Lin, Joana Pereira, Petia Topalova, and Rima Turk ; under the guidance of Petya Koeva Brooks.
Other titles: European and the Strategy, Policy, and Review departmental paper series (International Monetary Fund).
Description: Washington, DC: International Monetary Fund, 2016. | At head of title: The European Department and Strategy, Policy, and Review Department. | Includes bibliographical references.
Identifiers: ISBN 978-1-51356-251-3 (paper)
Subjects: LCSH: Women—Employment—Europe. | Labor supply—Europe. | Economic development—Europe.
Classification: LCC HD6134.U55 2016
The European and the Strategy, Policy, and Review Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We are grateful to Petya Koeva Brooks for her guidance throughout the project. We would like to thank Sonali Jain-Chandra, Davide Furceri, Florence Jaumotte, and Chad Steinberg for generously sharing their data on country-level policy indicators, and participants at seminars at the IMF and the Swedish Ministry of Finance for constructive comments. Luisa Calixto, Shan Chen, Katherine Cincotta, Hannah Jung, and Morgan Maneely provided excellent assistance for research and document preparation. Any remaining errors are our own.
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With an aging population and declining productivity growth, Europe faces serious challenges to raising its output growth. Adding to these challenges are the various gender gaps in the labor market. Despite significant progress in recent decades, there are still fewer women than men participating in Europe’s labor market, and women are more likely to work part time. Furthermore, a smaller share of women reaches the top rungs of the corporate ladder. Could greater gender equality in the labor market help mitigate the slowdown in Europe’s growth potential?
Against this backdrop, this paper investigates the drivers of female labor force participation in Europe as well as what effects greater gender diversity in senior corporate positions might have for Europe’s economic performance. Reexamining the factors driving women’s labor force participation is particularly important because in many European countries the process of closing the gender gap has stalled despite greater gender equality in human capital investment, declining birth rates, changing social norms, and equal legal access to employment opportunities. Investigating whether firm performance could be improved if women held a greater share of senior positions is also essential given that the empirical evidence from past research into this question has been inconclusive.
This paper finds that, for women in Europe, the decision to work is not simply a matter of personal choice—policies matter, too. For example, the tax policy treatment of a family’s second earner could affect incentives to take up work, and public policies providing the kinds of services that make it easier for women to combine a job with household and care responsibilities could also support women’s ability to enter or return to the labor market.
This paper finds that having more women in the labor force paves the way for increased diversity in senior corporate positions and better firm performance. The empirical evidence suggests a strong positive association between firms’ gender diversity in senior positions and corporate financial performance. This correlation is more pronounced in sectors where women comprise a larger share of the labor force (such as the services sectors) and where complementarities in skills and thinking—and greater creativity and innovative capacity—are in high demand (such as high-tech and knowledge-intensive sectors). To the extent that higher involvement by women in senior positions improves firm profitability, it may also help support corporate investment and productivity, mitigating the slowdown in Europe’s potential growth.