Abstract
This paper examines the post-reform economic growth in three Central American economies -- Costa Rica, El Salvador, and Panama. From 1995 to 2015, each economy witnessed phenomenal shifts in labor market participation and occupational distribution of women. If the innate talent for a job did not change differently across genders, the occupational changes suggest that many talented women in the mid-1990s were in professions that did not conform to their comparative advantage. The paper studies the evolution of the occupational distribution using a model of occupational choice in which three forces create frictions to efficient allocation -- discrimination in labor markets, obstacles to human capital accumulation, and preferences (or social norms). The analysis shows that the underlying improvement in talent allocation over the past two decades had a quantitative impact on growth in Costa Rica and Panama. Decomposing the aggregate effects reveals that the gains were driven by declines in obstacles to human capital accumulation. In contrast, shifts in labor market discrimination created headwinds for expansion. The aggregate effects in El Salvador are relatively mild and noisy to the extent that the qualitative effect is difficult to pin down. Nonetheless, the analysis finds that the preference for market work has increased sharply in El Salvador for both genders and has proved to be a drag on growth.
Highlights
Guided by the principles of the Washington Consensus, many Central American (CENAM) countries started on a path of structural reforms beginning in the late 1980s.1 Since the region has recorded considerable gains in multiple dimensions of reforms outpacing those of many fast-growing economies during the period (Swiston and Barrot, 2011)
The aggregate implications are milder in El Salvador
A school charges a premium from workers in groups against which it discriminates to offset the marginal disutility. This concludes the discussion of the theory of occupational choice which I use to study the evolution of occupational change during the last two decades in Costa Rica, El Salvador and Panama
Summary
Guided by the principles of the Washington Consensus, many Central American (CENAM) countries started on a path of structural reforms beginning in the late 1980s.1 Since the region has recorded considerable gains in multiple dimensions of reforms outpacing those of many fast-growing economies during the period (Swiston and Barrot, 2011). Women's and men's preferences have shifted away from home-based work to market occupations in Costa Rica and Panama. Unlike the US study, my identification strategy allows men’s preferences to change over time Over the decades, both women's and men's preferences in El Salvador have shifted away from market work. Following the identification strategy in Hsieh et al, (2019), I measure occupational frictions faced by women relative to men This amounts to assuming that men do not face discrimination in the labor markets, nor do they encounter obstacles to human capital formation. There is some evidence that suggests that women receive subsidies in human capital formation in Costa Rica and Panama in certain occupations They are dwarfed by labor market discrimination. I often refer to the first two forces together as barriers to occupational choice
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