Times of crisis and female labor force participation - Lessons from the Spanish flu

It is well known that macroeconomic shocks can have asymmetric impacts on the labor market participation of male and female workers. In the absence of universal social protection, a household may decide to temporarily increase female employment in order to compensate for a loss of income by the male counterpart. This phenomenon, usually analyzed during times of recession, is called the added worker effect. We go beyond this typical setting and attempt to identify and evaluate the added worker effect during times of a health shock. For this purpose, we develop and estimate a non-linear DSGE model using Bayesian methods and data from Sweden, covering the period 1915 - 1956. During this time, Sweden experienced the severe 1918 influenza pandemic outbreak, two massive economic recessions, and a period of pre-war preparedness, or Beredskapstiden. Estimated non-linear DSGE model with pruning and Kalman filtering We find that females’ participation in Swedish industry increased during the years related to the Spanish flu. In addition, the female labor supply responded to male labor supply fluctuations over the whole sample period.