Differences in the labor market by gender and aggregate income

Abstract

What are the effects on aggregate income of frictions in the labor market that affect women's participation and occupational choices? First, I develop an occupational general equilibrium model with heterogeneous agents that face gender-based idiosyncratic distortions. Second, I extend the model to include an endogenous distribution of formal and informal establishments to closely follow the distribution of Mexican establishments. Third, I use INEGI's National Survey of Occupation and Employment to calibrate the model and quantify gender-based frictions in the labor market in states and regions of Mexico and their effect on aggregate income. I find that aggregate income would increase, on average, by 4.3% without women's frictions to entrepreneurship and by 32.1% without frictions to entry and entrepreneurship.