Job Opportunities along the Rural-Urban Gradation and Female Labor Force Participation in India

The recent decline in India’s rural
female labor force participation is generally attributed to
higher rural incomes in a patriarchal society. Together with
the growing share of the urban population, where female
participation rates are lower, this alleged income effect
does not bode well for the empowerment of women as India
develops. This paper argues that a traditional supply-side
interpretation is insufficient to account for the decline in
female participation rates, and the transformation of the
demand for labor at local levels needs to be taken into
account as well. A salient trait of this period is the
collapse in the number of farming jobs without a parallel
emergence of other employment opportunities considered
suitable for women. The paper develops a novel approach to
capture the structure of employment at the village or town
level, and allow for differences along six ranks in the
rural-urban gradation. It also considers the possible
misclassification of urban areas as rural, as a result of
household surveys lagging behind India’s rapid urbanization
process. The results show that the place of residence along
the rural-urban gradation loses relevance as an explanation
of female labor force participation once local job
opportunities are taken into account. Robustness checks
confirm that the main findings hold even when taking into
account the possibility of spurious correlation and
endogeneity. They also hold under alternative definitions of
labor force participation and when sub-samples of women are
considered. Simulations suggest that for India to reverse
the decline in female labor force participation rates it
needs to boost job creation.